Bread Financial (BFH) 28 Jul 222022 Q2 Earnings call transcript

Good morning, and welcome to Bread Financial's Second Quarter Earnings Conference Call. My name is Amber, and I will be coordinating your call today. At this time, all participants placed in a listen-only mode. [Operator Instructions] It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial.

you. Thank slides found reviewing section on website. the release the of will be can the we of and be earnings our Copies Investor Relations

the Executive Vice President and Chief Ralph of On of Financial; President we Bread Officer Executive Financial. Bread Beberman, Chief Officer Andretta, Perry and Financial today, call and have

forward-looking certain information our metrics, made are to would and update over provide website some in call non-GAAP the believe Andretta. the With to information I will presented are investors. begin, you no your we to materials has and for in today's call we may to posted remind uncertainties financial on Ralph obligation statements Investor filings Bread that to turn SEC. call, the release the on on the call. reference on responses which useful statements. Also some of quarterly the risks the earnings to Before included company's today's to Financial that, GAAP like Relations like those Reconciliation with our I measures of subject and questions would contain the These breadfinancial.com. comments will described of our at other earnings speakers

Thank quarter. this you, joining updates highlighting by thank start everyone on X the the to morning. for Brian, and you call Slide will key I a from few

long-term increased and consumers growth which co-brand and goals was up and continue the just by transaction second driven that This sales financial our size, of the and cards. our sustainable, towards with progress consumer quarter, from second In to quarter shopping make strength activity with not profitable from our our on beauty to verticals growth. shop continue trips, remained particular a engage. We result of XX% indicates XXXX credit focus strong proprietary jewelry

an and proprietary and categories are both cards. customer discretionary spend both nondiscretionary in in our We seeing increase across co-brand

loans up with XX% of the basis. are our on continued with loan year-over-year acceleration pleased a end-of-period growth We

are consumer launch our momentum on deposit savings new in growth our balances building deposit our XX% retail the Bread brand We year-over-year. up with from through balances with remarkable offerings

early in consumer we are Cashback the their we choice of Bread Additionally, top-of-wallet experiencing within Launched majority acquiring Gen-X base. everyday millennial are emphasis mobile with on accounts. strong success American in spend seeing Express of April, customers and Card cardholders and the categories, with our are in with an channel we new offering behavior,

our of multicard Our business successful date, including the reflect development wins program, strategy. growth AAA to execution our

our continued and recent pipeline, additions given the we renewals future. strong We business are new and about our anticipate excited growth into

recession transformation positioning economic our We financial resilience continue potential our Perry are modernization actions to critical and improve which highlight as our and technology a to business enhance efforts. by readiness, strategic our bolstered recession will wounds.

navigating experience leadership and seasoned successfully in of data team economic Our downturns monitors extensive cycle, our economic the the health remains position. The consumer full including customers. continuously good financial a overall economic has and financial

trending been very has has rise, unemployment especially sales upward, wage the weakened to While consumer the and sentiment segments. rate retail is low income in lower continue growth

we historical concerns Payment have we CECL remain year about coupled reflected conservative normalization full are our recognize off that guidance. creates our a we in of growing recession delinquencies lows uncertainty, delinquency XXXX, and However, confident the the reserves. payments and with coming normalizing rates in expected potential and and

members. North AAA, I one our long-term highlight of relationship success. Moving million some America's a with to most business morning, will than X. trusted membership development XX and serving largest announced we organizations Slide This more new of U.S.

expected AAA's definitive quarter. in existing card credit a acquire fourth reached also the We portfolio contract to

variety value of renewal to and we enhanced -- help North platform X we As America, unique longtime intimates nationwide. AAA multiyear in providing cardholder further of services as quarter, Torrid, a direct-to-consumer that through brand the wide XXX valued America offerings its over million of Through a drive products, travel top-of-wallet discounts partner, North and organizations travel a with usage, over insurance loyalty with range Also a apparel leisure during and their a co-brand customers propositions, X brand addition growth. portfolio. the one excited signed of in and diversifies are as serves largest e-commerce AAA the full-service stores our well

to retail, industry. specialty modernization fast-growing drive in We will and with coupled use acquisition spend, further our expertise this in digital loyalty

improve remains Additionally, we industry. and designed expanded introducing largest to Rewards cardholder Caesars program our Card enhance Caesars proposition the loyalty Rewards the an loyalty value experience. improved program, in

installment to Pay. us continue we in lending. in disciplined Also, new on over with platform and the second partnership signed profitable and We XX to with providing with quarter and partners lending. small- network launched focus Turning quarter, merchant for the Bread our of our to a extensive Fiserv sales second grow medium-sized access

strength As our while by our business our pipeline portfolio. continued positioned progress. success. are technology are diversifying believe add to modernization further X encouraged and quality of I additional activity we Slide partners previously, the continue We well mentioned we development to highlights

modernization us drive have and consumer. convenience helped efforts choice the digital Our for

the to end product full consumer migrated in and transitioned quarter, our choice. coupled capabilities. increasing records of and of channel our core cloud to processing and flexibility data our our including business of millions analytics the the expertise, the right we At further data model provide product with tens simplifying to of Our Fiserv, personalized and system their offering suite, experiences the

Bread is how technology, to transformation we long-term and are going conversion are capabilities, pleased may major market have all for positioned forward. to challenges, have While any resolution this ensure efficiencies, time. completing By brand to comes migration with fair the to and partners systems this that materialized. teams cardholders of been magnitude business with modernize Financial milestone this enhanced impacted during speed of faster working our drive degree better our scalability efforts operational some our anticipated Overall,

advancing growth our our talent, enhancing partners capabilities, our product providing I balance will many on strengthening the sustainable, and targeted for We sheet have brand it resilience profitable expanding to our and iconic come. renewing earnings adding achieved and continued milestones, remain over digital including and our financials. to financial our offerings, review to diversified to growth. focused Beberman, support now turn years Perry CFO, We

solely Ralph. driven consumer Slide credit with were Thanks, up quarter XX% $X.X increase million Average and XX% X the effects disclosed ongoing previously averages noninterest subject sales delinquency provides loans agency as were remained sales basis second and continued legal up quarter Bread year-over-year billion strong. rates purchase and loans or up and second double-digit while a $XX dispute with the Financial written end-of-period XX% to loss in XXXX, by Credit were collection from a debt our was X.X%, respectively, highlights. rate to point spending share the debt that for XX. price carrying of company's Inc. collection the total Revenue the of XX% value Revenue net versus Loyalty at quarter moderating in payment included below of the $XXX million historical investment credit off of loss agency May rates. accounts increased XX by metrics increased remain X.X% to write-down Credit Ventures remain million, June of quarter. net of XX%. statistics. with Loyalty the The for expenses Ventures, driven third-party sold our as $XX the a inclusive in

rate were by written-off on The $X.XX billion quarter. a $XX build reserve from accounts impact the Loyalty an $X.XX in write-down diluted at of of million build, $XXX The income net the million loan and additional reserve $XX purchase diluted million of EPS impacted our resulting million had by build a of the $X.XX $XX reserve higher EPS. both in total the and These $X CECL $X.XX for combined of Our quarter impact. quarter. the reserve growth in EPS combined diluted of items, Ventures reduced and with nearly

income more in from can coupled basis which interest second detail average up XX% the at from due resulting was interest XX% yields. Looking declined X% cost loan funds, quarter to improved X. loan lower expense of Total higher you Total which Slide points 'XX, balances, XQ on with was slide. XX write-down $XX and financials inclusive our of Ventures. in revenue, equity share value of merchant investment Noninterest the method retailer in the million discount $XX includes the see on of net primarily Loyalty negative from following our carrying million, arrangements awards income, customer the impact interchange fees, and

the our Ventures increased the have second this costs, year Technology XX% expenses item XXXX noninterest Total compensation most correlated investment Loyalty closely said, increased benefits with from in XX% credit impact, marketing from which excluding previously and of we increased announced due the efforts. employee quarter line and prior quarter, As is for the period. Modernization the to sales

This fifth down was reserve result the sequentially appendix in a deck. pleased pretax rate are the expense million of that PPNR. end-of-period quarter quarter continuing relief loan XX% second on earnings largely build the slide quarter $XXX volatility, have that year-over-year details balances of consecutive higher operations the pre-provision and by tax the the $XXX we our XXXX. Taking compared from can drivers Additional quarter Overall provision marking improved a out of to was the million growth or of in a million direct found quarter XXXX. XXXX, in in driven higher versus income second the for be of reserve second we $XXX year-over-year, double-digit seen and PPNR our

earnings. be our making on right said, to to As quality we have the focus produce continues decisions

X. to of Slide earning left yields asset The side our Turning balances. highlights slide the and

points loan declined basis with improved Net sequentially approximately normal points quarter year-over-year seasonality. XXX Second increased XXX yield margin and basis year-over-year. interest

the in interest line we side in expectations liability increases. the saw Fed increased slightly the slide, the quarter, of with second rate funding On sequentially our costs recent given

see of continue on from XX% to deposits in bars year ago now quarter. bottom the grow, direct-to-consumer representing interest-bearing total the right, can you XX% As stacked up our our liabilities the

portion will becoming meaningful our our more to retail base funding expect time. an We of deposit continue even increase, over

Moving the on upper I'll start to Slide left. X.

basis trends of second increased line approximately basis generally in points Our delinquency the quarter-over-quarter and in low points historical historical sequentially, up XX was XXX versus quarter XXXX. approximately with rate

the right, upper XX effects increase were accounts X.X% from basis a we that the to that the a can point you including previously On collection the the agency. rate written-off had of purchase of see loss for debt third-party of quarter, sold

year will conversion significant minor system our credit to our trends. monthly metric impacts our not full in guidance, create While timing

rate to probability Since reserve XXXX of of to to recession to according increased has our XX XX%. XX.X%. approximately conservative posture page, from the our reserve the left days economists, from quarter closer a the regard to to XX% a bottom first We with of the maintained ago, Turning rate. increased

Our scenarios, of inclusion the including believe improvement unemployment. these rapid provide future our of model reflects underlying probability loss to absorption pleased our remain sufficient weightings in rise in overlays we harsh scenario credit economic decision with severe economic recession, rate. in credit the increased a in the pre-pandemic given leading prudent capacity portfolio scenario the We reserve to from increase the our reserve the of our included conditions Overall, levels. quality economic

You the can distribution economic economic uncertainty. a bottom highlighting rates. has improved In low right-hand in outside of that other interest quarter, significant period low see the and our period chart on revolving page, credit of to over during first of growth, risk and consistent of inflation time this forecasted the the remain improvement side a words,

to expect full Our pre-pandemic and would provides pass said, our our of That and today, year this product reserve elevated. period for enhanced outlook rate significant management risk diversification. portfolio as we we composed given financial rate partner produce our reserve levels is it Slide brand XX until XXXX. economic a credit remain uncertainty, below

Our consumer throughout payments assumes XXXX. moderation in a outlook continued

to We net benefit nominal in expect increase interest income. result the rate total interest ongoing will a Fed

expected grow are driven range double-digit low the Our loans strong full to year XXXX by relative in activity. to average sales

expected throughout XXXX AAA expect new of our loan This balances average given end our the outlook the year. quarter XXXX growth, be portfolio of greater of the new of than includes billion activities close including to to year. success acquisition in stronger $X addition this the We year than loan of our expected fourth from end-of-year growth signings, business

with XXXX margin consistent and be around to growth anticipated growth full XX%. average revenue loan interest year net in expect We

target operating positive to continue We full leverage in year XXXX.

leverage expect the throughout We more remainder operating modest level. which to will down year increase a expenses the of year, bring in full our

million transformation. $XXX expense Digital Marketing we've employee of business fuel Technology opportunities our growth As in be Product discussed, A evident as $XXX engineers to over investment and strategic operating includes efficiencies. continued large previously future scientists we of and investments Modernization, incremental data to to advance Advancement, will Innovation portion the further digital hire continue outlook our and million in

direct-to-consumer half of well our second near-term to are of new processing costs and of to expenses We including our higher as plan in and sales XXXX and as related also a our platform. partner Technology result offerings. a increasing with marketing increased costs brand brand campaigns as the system expanding core marketing of into continued products associated joint Modernization, for investment spending processing on Information the result ongoing as Fiserv Bread the conversion Pay higher

As will in in the result revenue Ralph both and the mentioned beyond. in and synergies Fiserv XXXX earlier conversion year, expense

We expect will quarter throughout and business to total add and talent. each expenses sequentially we our XXXX increase continue as grows invest

customer We now expectations. investments are of ongoing stay making to ahead

average average loss Regarding historical X%. to our range. continue year to anticipate net in in the long-term will we of would below through-the-cycle be XXXX reiterate confidence loss net loss of also low rate our full our rate outlook, the rate a the outlook mid-X% I

tax normalized variability timing with due be items. in rate We expect full discrete of to our quarter-over-quarter of to to the year range XX%, effective various XX%

our transformation loss capacity Moving to balance efforts, and we absorption improved Slide XX. Through business our mix. have sheet, funding

refined an in TA loss outperform Second, readiness credit we've basis economic better we financial enhanced throughout our changes an deliver capital our have to sheet playbook decision-making, we've positioning points TCE These improvement risk X in strengthened Through nearly cycle. levels our expectation an Financial prudent management proactive just balance ratio have in ratios, and growth historic XXX profitable strengthen including years. and to distribution. recession to resilience, And Bread underlying with ensured our third, sustainable, credit and we a place. our

Our higher reserves need more combined to difficult capital economic positions Financial whether conditions, be. our with credit increased Bread if position

key strengthen will continue been risk position underlying and do debt have We a levels distribution transformation. credit deliberately mix our increasing and business reducing our to Enhancing our consumer of our our to is proactively and deposits so. management of element credit

early XXX towards leading manage manner. a of mix We proactively, above partners we We manage our place readiness on lines in and portfolio our recession as credit have swiftly and and diversified COVID as Vantage quality of across playbook to portfolio to who a in XX% products the helping customers and shift higher a have a have open buy elements managing customers focus their healthy balances have implemented with credit a onset score.

and of emphasis can resilience payments, persistent ever better When very to manage customers while who these implementation of enhanced continue we to risk we additional overall been a stratification risk see are our a potential and brand combine we While to pressures do strong to place our with we a extra enhancements believe their and have we portfolio. consumer sensitive base, and inflationary positioned portfolio diverse our partner terms you build that in power. they maintaining credit are on more spending We've recession. in improved more technology for profile from ensure high purchasing also benefited than

in environment. and this risk We criteria underwriting our will continuously changing models update rapidly as remain our proactive we in approach management macroeconomic

our successfully we make while tools necessary to ready for the the economic necessary to an manage are the to questions. changes of maintaining continue financial resilience cycle. strengthen to now company lines Operator, the through We open

Instructions] William first comes from Robert? with Napoli [Operator Blair. Our Robert question

peers does Thank of you, a reserve said I versus on and just You cycles. mean? mix rise confident outlook portfolio you What outlier an through you Ralph unemployment? built rapid What have in? the you're and on But and like sounds it unemployment. mean, build, that morning. on credit you do your good sound your in on forecast I Perry, what mean, credit your awfully outlook build,

Yes.

me comment that. on let So

the strong is confident the and and means we're imply consumer understand is reserve constructed. observing our But their the the, that performance criteria it's just patterns. an but look portfolio credit or what existing And role, their and over you're to what start in by portfolio of time. what as spend we're we not the We and scenarios And we've the payment portfolio behavior that conservative at a moment, prudent into reserve feel you're let's So we severe say, is very said, trying when encouraged the in what credit could in models, what right. with the outlook. being

not So when you sharp a going -- we it's think like, this long pretty where how in you mild, inflation, to economic Moody's pretty actually when that is rises take a the unemployment have rapid what knowing period you to in have all then -- persist. about you persistent outlook And have high use period. their look scenarios and they severe moderate

recession every different. Now is

pull -- this and stay let's And and -- ahead honest CECL had current when said in pre-pandemic, simple we be housing produce a job same But what outlooks So if model, get when stay when I that, unemployment. the economic you from means that, we're let's to as we XX% contemplate at be chase probability when one a those apply full have but call run a of and of we not you Right a when the that's in, this going think the the as lot a from to portfolio, was reserve XX% remarks, it outlooks other to a suggesting. about well it so you it go with were in And position prepared like recession you. we'll by you what -- prudent last driven to period where the what rate just -- we now, through that time. with period. of XX%, in and the the to and think a we to went you're just it's model below

those -- equity, business XX% reasonable? Perry, you a have on I confident And you are to different, a are How knows? Ralph you're Assuming your are are mean, you consumer, that of have and but as time average that X guess, on targets just, guess, over XX%. today, likely -- return I can follow-up. cycles recessions look who targets for at are very going I deep recession, mean not we to don't strong your I

we high in pace range I grow. XX% continue we The at so the target to -- to is have which at we honestly, capital still Yes. variable that mid- that, that mean, appropriate levels. one

period going a call -- that's tax to you're If those growth need up that and you in we in that of it, growth period. CECL returns suppress put to high

and period economy where growth a you say, are growth you're rate putting CECL into and loss As I'll the and the is, you up through much you tax the have expect what moderated get as everything not cycle.

are We responsible growth for profitable definitely this time. building company over

I of just portfolio size give sneak some on could of commentary kind additions? The or If one one and you the and AAA, pluses a last in. AAA and portfolio runoff the minuses on can of the

yes, couple things. Bob, of a

So an this we have with the $X-plus to of excited growth we're I to thrilled million of will of props. a is this in portfolio on a end AAA me size have with first, we comment U.S., XX iconic the of new say don't in back more say AAA and let billion portfolio. that. help portfolio in announced part this a and couple the trusted is that significant brand members the exciting We brand, are than the value But year, partnership grow of

from Our Sanjay? next with KBW. Sanjay comes question Sakhrani

recession. obviously, guess I GDP Maybe a are But forward another period up print. if we question. we Bob's got to on now, negative we guess, first look follow Perry, of technically, I in

about sort have now? rate step for what reserve should go it rate here? be from that reserve recession And the the incorporated we next like So if you've would higher? a feel Like mild to do think you of moving how

Sanjay. Yes. Thanks,

we Including a like in about like reserve portfolio think methods for I'd each go at there's the that of that that into think an and the stress. there company it's modeling As we it. the had anticipated talked anticipated. overlays we factors point, this but put number uses, rate, then factored the about, what we economic to

it's And of the I we for Could But not we'd just pretty period in trying measure consumers. things the right print like. feel remain to you, to should sure feels spot to chasing significantly are this what now, only a got right is I'm what GDP like in a look that But like passes. again, You this we increase a good now I recession level -- not are mentioned sure. make it this yes, good place this we worse. elevated what suggesting is we on think we we're horizon, we when expect. around know until again, think would and tell our

follow-up should NIM rates When the guess you went I and pass going decline about or you Then higher. the it not for of how on reiterated did year, only guidance, some can at yield year-over-year, positive into next and progressing you in know just yield. think my is sequentially forward? but Could -- about we given -- Are rate progression you can move portfolio we talk on how but unfold Okay. data increases? look the able Maybe question the I the that year guys the find this also to you as to of come. cost rest we

question. good Yes,

So we let's has what of come typically yield one in lower net the that into is in because -- happened quarter. it happens is the goes NIM interest seasonality fee with traditionally our have tax late in And -- -- things that the what second through payments the yield. our and about that sequentially margin talk quarter second of

rates couple through And they to building Fed and it's the up, to and increases Street -- start So deposits, date is variable prime a the months. deposits and and on that period. on on that the happened of increase a addition side rate another the in of Wall higher loans, we point, It published quarter week, those month, a the for there pass that when faster passed XX of what much then pass goes Fed June. happen down May, along that higher of remember, drives in whereas then were XX When grow then within as that asset priced Journal a in basis some the aspect. deposit we goes following is actually consumers for rate we last occurred this in

that points think you So in through got about of will that where through terms of the in passed June July. from consumer none billings XX basis come

lag we asset little again, So is you -- a about as more this, accretive that of rates slightly talked as are But go you in effect. up, are sensitive about as get think so process. NIM, interest overall, that we've we

Our Research. next question from Wolfe comes with Bill Carcache Bill?

and Perry. Ralph

I a of So wanted on earlier kind questions reserve bit drill the and little the of of follow-up to rate some more trajectory into the here. from

think know in So of up? is that of we supportable we again. overlays But a period uncertainty is reasonable reserve claims the down under of peak the some and the to past that's flat recession reasonable reasonable that's get to the coming when front thinking and Is we But to trajectory as of how rate CECL, initial and of could there Is as front that initial start the about lot in of it? once look way to degradation. it rate essentially be that as kind claims, us speaking, kind for reserve to the sort and going broadly you've start look. when in we about long don't contemplate a as then rising that's to long of exactly got us, still there's expect

Yes.

what and traditionally strain credit way a driver when think think about of a it what as about a big unemployment consumer. I to different think creates terms. on in environment, is a recession creates you loss think I that's Again, yes, But way higher again a fair general because as come outlook. released fair downside, go peak and look it favorable have you if And this through about, -- that on you you the economic unemployment a it's when claims period. to get you trajectory more at talk reserves a every then

that to can So ahead and then rate that favorable where you're you for a being more reserve your peak get aspect bring see down where the period trying overlay then conservative. you, you you of we're implies point to

you a looking up continue your I -- reserve suggests corners, follow the could will, floor. certainly quarter refreshing to mean it's that ended your on average drift it that guys I are the you up would it a if X% confident around peers that NCO I are, be guys level? we an X% did but have it's reasonable if where that term average, of in in there guess, some would exceed cycle rate letting would where guess, to Right. a since and I see downturn If you be to rate through lot longer outperforming period expect

Yes, right. exactly

of you to the expect cycle when going You're what a have time X% have that's below we're exactly periods we should times, and be be short to we should you in the X%. good that expect of period recession, means. can above And through

inside give groups trends little of if the a and overall bit different Ralph, your Understood. take maybe I you cohorts for may. just and you're inflation. that how seeing us spending following some you one by up if remarks, And us of impacted a and last they're being on Ralph, those your ask of the performance earlier opening more sense across I could to wanted

Yes.

diversification, co-brand on our have we albeit our partners. have to Card and nondiscretionary, PLCC and It's and have we seeing with if our what we're and they seeing private -- -- product products lower outstanding our is rent-to-consumer label, So label, private cards where on the lines where with or book think feel discretionary, Cashback but there, good seeing both spend co-brand the seeing that. the and card down spend and loans. with our we're good consistent up spend you proprietary and And about spend we're Bread Vantage about -- we really we're

price, are but consumers a we're with ticket just again, becoming So they're continued consistent products large -- and seeing engage transactions, that our tells spend. not And top-of-wallet. us which multiple

question Jeff? Morgan with Adelson next from comes Our Jeff Stanley.

up the could bit. a was Perry, follow NIM I just we if on wondering, commentary

sequential here? in Fed to decreases slowing as benefit to that XX%, around this XX% of sensitive maybe I like maybe Because have you implies with your us until maybe being nominal around out. what year. if about some of talking about that referred the that ahead you to get here start the costs of about that you're asset is the could about you And hikes up here understand assume going down also talking you're but to the Fed help to You're that reasonable question, think or going to talking XX% asset going we funding it as earlier? yields it have Wondering kind the lag part a the NIM band think for XX%

Yes.

And little your there. little think seasonality I bit get you're a there's in going of a have point, to this to bit of a lag.

going as one the just we in have increases up. month yesterday, happened caught like you're a of until a lag then Fed little bit to this that So get

So that around that's over. much not not much going have it's thinking under, I -- to we're going It's float mean number. thinking around to XX%. why saying

Okay.

And that in so catch would past get maybe that, your it maybe be asset see much XXXX you'd reasonable like benefit as a more we material as beyond that? yields up

think we're the accretive. Again. I Yes, way to about it, think slightly

going going where say, about and go you as that to we -- large heard a winning win wins have material all talk as well want to is, influence interest I I'll what's the So the us have today, they're credit some composition NIM. that in lower put risk future net lower So you if portfolio have bring portfolios, on we different type margins, in right? to a

build to label, private continue that's higher. We out

what XXXX. of is as we the move So composition really, the portfolio through it's about

the quarter. came below thought what sales this be a credit trend I on bit in And Got little quarter. then would it this it. just It

same-store are with how maybe pay wondering, looking there. what maybe there going is later now, give Maybe is Just going the and your color can exit us into anything some you like? of sales buy initiative the on BJ's

Yes. competitive sales. I -- double-digit is how Sunday, because quite where buying with increase in to one that differently XX% going about We've It's is it's our in not approach economics out, and A be that doing in BJs prudent co-brand increase I'm really but not day particularly in how portfolio, any paying partners sales the the that credit about in pay Ralph. and of still to pleased any products. credit it's twice and take It's we than sign cards, chapter. our every frankly. talked other very we're effect. that and we of on X, later

but good. across across products. And and seems channels really sales -- XX% it's So for all me all

we're are think and with I customers that's engaged an our So our products marketplace. in are putting us indicator that the using that

if come there? then update down. I Is thing could what last continued potential that? thinking plans around are fit one has just Have on to Loyalty. on And The stock there changed? there modernization Or price there you any your

is was write-down. the has $X.XX. down, I'd reflected that Yes. and write-down, No, the books around you clearly, for the at stock time price had did $X.XX. in share their we come tell -- our it we about price the What We on

write-down. the Delta that caused what is So

$XX million the or We so on remaining have about books.

So to it's overall. immaterial our business

not a the not as investor be are in company. a business. planning to what strategic It's We do just we

So intent monetize can you modernization, it upon to have meaningful our tell, not will is to as us. a impact it. But

Bank America. with next Mihir? of comes Mihir from Our question Bhatia

with start to reserve. the want I did

XQ you making Like reserve we impacted to data, anything NCO and your take see anything there Just understand see ratio? you is that's your expect below I reserve primarily like rate But the outlook? in seeing this to there's absolutely in some that want be like make driven normalization. your ratio clear, something was data unusual, we obviously, we're by the didn't are just very the clear sure higher? Or the line, did you that something you

-- on we've credit question. performing moderating lot expected rates, against try again, risk. occur. through we in for the -- reserve, thing and good for the it's normalization in for to payment more had we're know, and you waiting And that's to CECL and as this And to there's to normalization see a to modeling, Thanks but going revolve be I Mihir. been pull that's a well clear, clear, priced No, behavior card a be we and we've we're because like going the business get

And so we feel good about that.

pre-pandemic. this ran we -- start ran is -- when when a I'll it portfolio than it through -- the really, rate So with produced I lower our CECL reserve model, again,

the our that that come. and ahead to the corner the cautious again, What's trying rate Not It's saying could of and the going model is look we tell around again, it's to into underlying portfolio it the would what portfolio. trying with because, up strong. of get sensitivity the So is to to come. leaned just, economic to be me of outlook, causing go

that, really. As as simple

nice Are in how portfolio does No, think to incorporate still obviously, average that? understand you good $XX some still wins? go one. wanted you about talked about that's should a Just you. to loans feeling -- board. understand outlook? XXXX? Wanted more portfolio to now the do have that helpful. necessary the of thinking trying And that you've then feeling about achieve How be to I still that billion about I just you Does win sure XXXX. AAA on coming we Or with to make are I

Yes. $XX that think we of billion contemplate The our AAA addition did the again, we're we was target. certainly something about, and -- about XXXX, excited as

growing a you we still portfolios, It's that. existing combination going about feel here And So then to acquisitions. confident is from of products. what see come new

X, all for are So and number XXXX. confident confident, across we that we're in still

come I'll what just we'll that softens under little that to bit, the number. it's statement. risk about set we're do we to to chase goal because bit clear hit to And a as get number. loan a in to management if number, add on the this economy around you Ralph some and that be X ago, years had almost going hoop And just give going pullback. that Think little meaning, a said. We've that on not We'll team Yes. this look, to

we happen. wins the around little us that. come that going to number. because should coming everyone we're on a keep what's hoop over the the But flow and If think returns we in like I that's for

Yes.

that we're we're I taking think the that risk rewarded target getting exact than risk taking. important ensuring is more hitting the and we're appropriate for

again, and and acquisition, penetration a of existing off number. partners. be deeper And feel combination we we're our that it product in growth -- not coming So can

Understood.

situation you lower late You do how Are hoping CFPB disclose but review. is CFPB the all exact been don't you maybe you or more within the manage you for just fees last late do on it your or they what on internally? with them? -- can just about what chat breakup obviously about are just maybe like me some this engaging And that. I fee question that? that? one the kind talk approaching was think Just I how some philosophically, cap with should and of you the understand late with And to something fees, just there's just come out

Yes.

I've talk the change count been years good you and happens, it philosophically. XX I'll and is this So And adapt change. can in business about one companies change that move forward. on to thing of you is thing one count when on

do with in us, with what complying our the we that regulators lean comply As rules now. we with and are what and We're we before the that's rules. we're existing as doing

what we're reliant We fee. portfolio publicly. that overly have product continue our or outside have our the ensure say on one nothing made continued share to not to or with And work closely been ensures the is of a will are a I given What reported that to regulators of we any capability views diversification known.

issues of just but reliance for is So drivers. based we our there. disclose to don't arrangements, include continue ability all portfolio, in unique many law. of different contracts our there we partners different is diversify And and as We certainly, on brand many have in maneuver, to movement the terms not with our that change specifics, regulatory the

question with next Smith Reggie JPMorgan. comes from Reggie? Our

refresher I've that? a I acquisition? portfolio the guys the the accounting an of how got for I and whether works you reserve a upfront guess, get to kind guess, accounting wanted will take to, around Or I AAA for have on, that few.

-- you're model I is yes. quarter. fourth Yes. that to presume The is I'll answer The trying the question. start out with way and it works

comes when period set online, yes, for portfolio those CECL have in other we loans, just reserve to loan will any a growth. like that that up So

traditionally P&L high with up growth period the account, CECL a be fourth So have to well. a that we'll those. the loan for through in as quarter, we'd anyways, establishing for our seasonally acquisition which reserve reserve post portfolio through is Similarly, us

longer believe, XX reserve, it. questions my think is or on I Just me like XX-month a reserve. that? of of I way kind guess months question way a if your rate folks with but And a And of wrong, no your asked there life is implied credit next like and Understood. it's about is thousand over reserve, know broadly reserve extrapolate so? a rule there the of it's kind looking correct the is, account at in what guess I to losses and I I'm -- of at looking have speaking, CECL, to thumb the

at lower way point, would loan reserve is can your No, end of the the be we economic than the there CECL losses the expected your is life concern of the you it and pre-pandemic. -- like it's really each I be those isn't. To over loans share of the with outside works, to rate period. established All said,

that So the scenarios high rate that are is. it's putting reserve as it as economic

that the weighting sensitivity have apply heavier the happen. is on I suggesting confidence when And so not risk severe I'm you XXX% scenario. actually to This that that's going a

in absorption doesn't happen. the event this So have it's that. we We're retained we're we into sure hoping a good this Look, improved buffer, gets to the an now. released like for make protecting something But capital company all to you'll and reserve all this have happens loss And just where earnings are position. back is continue trying

some to And of cards, core retail a know curious, if Obviously, makes business sneak I you your your now, sense. are That I strength trends the I curious. portfolio Just of mall-based about one think, and in. and kind obviously, highlighted the is, in more co-brand square that like shown that in portfolio? proprietary are just you seeing sales, sequential what with of And saying, actually there? the to maybe retailers the has could talk weak if if that other trying you your

if not. That So and seeing and our our retail, the as strong weakness in, business we're we're co-brand proprietary you're still PLCC remains and our products. in is

any seen not are in fact, co-brand weakness. we've And there our apparel. and X/X So loans of

Now probably products. verticals at we've diversified that of and a XX%, across number and

about sales co-brand but of sales. our -- So XX% are

it. Got

a not But obviously, is what saying be you're small of you're payroll it's apparel to well. piece your Is holding clear, and book pretty that just your saying? so up that portfolio. And

sales in both in up and holding pretty well. It's Yes. credit

John question from next Evercore. with comes Pancari Our John?

side? of some that -- are bands, can regarding on front, just credit you where in expect saw there increase continue the Maybe FICO maybe little certain certain this do the you you And delinquencies in a in increase to the increase drivers, of the the saw delinquency us to you pressure quarter. the you on seeing bit color perhaps On on the give products?

see we is the business composed, industry about our for we're this this think seeing this, we're a we impacts than look We And talked normalization year. this When we and about come way don't were where in it, entire going may more we have Thanks also question. is travel. And Yes. stimulus now little portfolio again, when it think you were through we've that different. others. we a down to the the about expecting peers look the sooner in portfolio of to at concentrated where wind

this contraction the had they and spend you category. big of see So that in during bounce back COVID now

our that the same to don't balance have do. we way stay tailwind So those

on general consumer things. the with more those we're So

is we're see on think and the top is that. seasonal I exactly what some of of pull-through expecting it So to

it then Okay. average. All on Can rate, that, indicating you X%, -- at being the answered to exceed that the right. the could your And related know that earlier certainly at rate X% out help loss expecting you're Bill you XXXX modeling? about you're your terms us mean thinking in you're the economic as of what looking frame how that outlook, charge-off I could maybe in your

for to year. way The guidance is we you January. right right in now the this about So around I of think rest -- we -- guidance get we're that, for gave the now, not are this XXXX. We'll probably, giving to guess,

on end what the strain a going into if period low saying, so to upper they're it guidance portfolio This that the position now, portfolio mid-Xs imagine be within be pre-pandemic the what for and saying We're that, can there is we the you to fundamentally said, give be of not caring CECL for could trying And economic be." could "Hey, are our you And year, to about happens way, bit now, you're and CECL right coming a be building, for below that's that are almost what's is. X pretty and it -- different levels business performed actually potential right? we're is correlate we to that's should of you next on reserve hit losses. -- to so higher. the the the our be you're what where periods. Now happened the again, right well losses what really is caring regard in in we're what is strong CECL things what again, of a necessarily going you sense will not performing to it So and exit projection of with might if as delinquency

to one, one would know does your I said legal that impact sold third there such credit And any transactions the front. future it's were just then last ability dispute. Are that a charge-offs other this you exposure? similar party And to the the exposure? you accounts that then offload on to a have contributed Okay.

that recoveries particular to do We impact and third-party we charged-off and of to can't the on part what can has we item. I that's that ongoing comment say, no parties. sell it that relates litigation ability for our third collectors But on debt paper recovery as our sell to some it Yes. debt to the in-house strategy, some

Dominick final Dominick? with & question from Oppenheimer Our comes Co. Gabriele

scenario reiterate to well, what want to playing with more might be thank realistic see of just numbers the so in through it's your you. some as reserves, the I refreshing a -- Great.

talking about could number. from your -- underwriting more bill growth? slow could how up talking and affect provide billings, just other the talked view? think the any changes But how about the billion not that of us for could just way have accounts And new detail And perhaps it filling loan $XX you reserve talk some you you You gas about it I about and follow-up. that? given has phone on can delayed people about cautious If day the changed their a your your Visa, AT&T all tanks to the maybe

our for you thank same AT&T position. read Again, conservative what things we said. I about Sure. appreciating the

Now a about almost has cell we Americans, when phone, every I every think underwrite American American. don't

And have consumer, cell phone. so a you're whether you a if subprime

that's it. So of the piece

and be in, is subprime seeing don't So say, what play we pulling the through I'll was the aspect, where they an billings. deep their strain may general think, I

the when through. so quality -- with For Bureau and of prime, data, employee, near us, strain on they can a we're see credit prime consumer time they on underwriting leverage spectrum that, much We stress, super monitor we our and underwriting more we underwriting watching obviously the non-employed. full have, based the everything and have adapt the we prime at of the how come from

into for the goes tools for lines the and business underwriting the also credit not sophistication for strategies. sophisticated with So important there's a line that underwriting but lot managing just new increases equally existing portfolio. and That's line decrease

sure from happen the risk/reward those accounts. manage we're Our account loss we closure, whatever around comfortable rate has to to ensure getting that to make the we're

to different perhaps to be frame just your then question percentage distribution? I the charge-offs And of score that any materially FICO a would late private Is a balances than it we your reason as late up label different way. were and net wanted card card fees average there follow adjust fees industry if for on the

talked time. about portfolio in co-brand as continues a over We're more our right, little Ralph I card. would earlier, different, to be shift think imbalances. of the because over bringing is it proprietary And mix X/X bit

So give in label. us XXX% private historical experience correlation to a wouldn't I

closing back now to I'll remarks. conference pass Ralph over the you. Andretta Thank for any

you in quarter. we to a have the adjustments day. the And I about forward feel joining good made, Sure. we're interest thank the -- feel looking questions. the future. just for continued to we're we Bread Financial. want and all good I Everyone, and your appreciate about We good

Bread Conference concludes Second you Quarter your Call. Thank participation. for Earnings XXXX That Financial today's

disconnect now lines. your may You