Bread Financial (BFH) 25 Apr 242024 Q1 Earnings call transcript

Good morning, and welcome to Bread Financial First Quarter Earnings Conference Call. My name is Shannon, and I will be coordinating your call today. [Operator Instructions] It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial.

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

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

call, based that measures These questions earnings call and management's materials with we included of and to the on information provide website. call Before reference over you speakers the quarterly useful I statements will financial to may in comments Ralph assumptions the I investors. our our responses believe turn subject on the With and the like would on filings of begin, like your certain other contain of Reconciliation uncertainties company's GAAP some that, statements. will forward-looking SEC. made are would remind to Andretta. for and today's are are those expectations our to some Relations on in current Investor measures, release described Also today's posted Earnings and non-GAAP risks which the to we to

highlights joining on with Thank good and morning the to start to first Slide solid our the call. you, Starting with everyone key X. I Brian, pleased from quarter the am year. the

yield billion our ratios. our strong to continue direct-to-consumer increased and book loan $X million per we year-over-year by share, diluted tangible value earnings increased our $XX strengthen risk-adjusted sheet. to and higher share as improve nearly regulatory to continue we We $XXX driven During our balance capital XX% deposits of quarter, $X.XX by income the a net generated credit to of expected.Importantly, despite losses per

this the time, the Our unsecured of XXXX solid investor we upsize financial extended our parent for level our debt XXXX. offerings, demand was by At million. the same our debt to by strong maturities in of notes which senior January by year.This opportunistically majority $XXX investment community we evidenced acknowledged as reduced position

authorization million $XX Additionally, we of repurchase completed the $XX quarter. our share in million

front, On ticket continued nondiscretionary a with interest decreased consumer quarter nondiscretionary in frequency first in and focusing many of online, big rates, the in-store the moderate and the persistent the and consumers value economic quarter purchases.Although the consumers given spending higher we discretionary observed spending continued pressuring purchases average growth. transaction inflation in reduction loan on sales to increased shopping and on

Perry improved our outlook. fees, management was consumer as our with of financial our net projections jointly growth payment further identify loan implement quarter discusses disciplined rule improve our gross tightening when made be to and we previously resilience what as our timing the proactive pleased quarter our with the taking necessary change. late he quarter and plans.This First credit action have am better elevated adapt impacts actions observed actions in visibility have in effective our card we particularly well final that impact risk delinquency we credit remain are economic by early-stage rule capacity.Evidence given disclosed working buckets. financial pressures resulted losses CFPB's rule initiative. credit necessary rate, our of brand to We closely of the pricing affecting to regarding observing meaningful our through credit In of the improved the expected versus date. to steps response and details I late impacted improvements progress share spending the to financial and regardless more partners can will which continued in we determined

our our and as over rule adapt of our of profile well the time. verticals products combination various pricing fees, over and the us mitigation actions include years past position others.The and to early change the APRs increased X mitigating strategies such of the credit statement Some consumer to improved and diversification underway industry among actions

ongoing the the CFPB the given remain for timing to pay late implement the monitoring deterrent to penalty reiterate credit will and value uncertainty outcome.I ultimately closely surrounding the rule of are change to would litigation mitigation losing customers through final while and related We more on our CFPB strategy we'll fee access we, less our continue I like and we paying negatively what said with litigation for consumers. industry late along credit will this to consumers will APRs as only scores, consumers or late impacting we more paying Not associations higher late, have and in fee lower continue prominent business fee in to serve CFPB, the past, believe role late, consumers and impacts the also long-term far meaning result shareholders. the a ensuring late their additional focused in credit.Regardless cases, against therefore, some for fees, deliver fee rule,

Turning to Slide X.

profitable driving reducing improving and capital growth, debt Our metrics, shareholder focuses disciplined responsible, funding value. long-term strategy our parent allocation capital on

balance investor XX, on continued investments business and our achieving our June room while Looking the growth. these at left, will more first our ratio see event targets improvement.We we where for since an quarter long-term allocation can strategies further than how we discuss the and that TA have to the TCE tripled host XXXX, and we XX.X%, you of in on targets further chart we will capital driving will see with

We are progress also reduction. making on debt

leverage including to have parent-level more in second XX%, this just over time X down January.We by we $XXX reduced in paying during chart, billion, from shown million debt $X.X our pay period. the down As XXX% most recent in than XXX% years, the over double ratio improved

off XXXX we million mentioned, ratio. our this year, our which reducing $XXX leverage we pay bonds, later remaining have in intend previously to As

which compounded our book tangible expect quarter grow at Supported generation, rate our cash financial value that's we grown Finally, book displayed a flow has of share of our this value. $XX believe tangible multiple book we time.We to of sheet value our continue the this tangible valuation since XXXX. balance resilience, strengthened first with our by quarter per growth, further strong and should yield a annual to over combined XX%

cycles of remain returns long-term profitable economic track focused unwavering reflecting prudent managing growth and leadership management, and our sustainable, record for build and our team environments. commitment through strong economic We risk through Our has regulatory successfully drive through to challenging capital generating on value and changes. decades-long a a regulatory shareholders experienced

responsibly, Turning XXXX and technology digital X.Our the reiterate, for Accelerating driving they and focus to offerings operational environment. are to excellence. Slide areas not and key managing have regulatory macroeconomic changed growing

may growth reflecting conditions, ongoing shareholders.Managing effectively to landscape, loan value our economic fundamental success. our focused for we We are on in challenging responsible offerings while laser-focused creating further environment is with on although moderate the are XXXX, and macroeconomic macroeconomic and align regulatory challenging sales our and to growth product generating diversifying the scaling long-term our

impact value drive enterprise-wide credit offset to decision-making. all our our CFB intended focus customers.Finally, late efficiency financial customer the on continued out our and strategies we anticipated risk top rule and Accelerating app to and customer and Throughout mitigation rollout I further the With a our effective experience, brand in fee date excellence building enhance operational mobile capabilities experience heightened priority. creation of to card improved numerous to satisfaction, on remains the focus our digital technology help reduced partners' will embedded is including we discussed. execute looming, to as XXXX, continue capabilities

our our are in in We machine care better early we to digital investments customer bots customers. learning seen success area utilizing serve have where our technology, and

efficiencies cost and system For resolution, lower enhanced targeted to reinvestment leading response with in is higher consistently responsible enhanced satisfaction our and call example, enable options our and voice self-service interactive expense to generate our goal to and support that growth faster provides business cardholders classification, operational returns. achieve issues serve.Our

where leadership comprehensive on Investor update strategy team will will host financial As targets. our and XX, earlier, refresh I on our more provide June mentioned we long-term business an Day a

the quarter's turn it Now our and financials outlook. to over Perry discuss to I'll review

everyone. and Ralph, morning, Thanks, good

X, Moving to our first which quarter Slide financial highlights. provides

During our by and quarter, credit-tightening from The $X.X XXXX and first year-over-year related XX% and reserve approximately of decreased net the X impacted credit billion months was in $XXX year-over-year was the year. first the quarter loans the prior lower operations additionally the by year BJ BJ's in quarter, due moderating sale average were consumer of actions.Revenue quarter sale included down with activities. spend prior revenue and continuing down sales coupled generated benefited interest release. from the Income as this year, on to million expense fee higher gain gain from the BJ's as the

gain larger the moderating of and driven reduction to found card for big-ticket net financials detail net marketing income the Looking or year can sale combination year-over-year, by average appendix elevated resulting $X of of driven X% in drivers make and would and Slide nondiscretionary versus posted reversal processing nearly the and fees primarily by pressure XX%, lower of lower deck fraud on decrease purchases. the in quarters expense lower interest in prior down ago. costs, quarter noninterest year. in quarter in $XXX interest items. gross at in higher the on depreciation the the XX% discount the credit a and Pre-tax from ticket to losses.Total details portfolio million, consumers on interest a was was Total PPNR, sale decreased a website. the and continue X. smaller on noninterest on expense be margin fees gain year-over-year, expect merchant loans earnings as in driven decreased the result slide on Total to by increased due more less Pre-provision a our or continue flat pressured a by as We big this including million amortization portfolio expenses costs.Additional to coming PPNR purchases income sales

in upward higher year-over-year, interest XX were to This of net result expected net reversal XXXX. a our sequential to of of the prime in tandem.Both seasonal sequentially to variable X. benefiting higher trends Loan interest the increase an pressured is losses. XX.X% continued cost funding second trend in fees credit higher yield sequential basis related together from price in pressure from and in in loans Turning move normal margin Slide and reduction the causing to margin in rate loan with interest gross increased of quarter yield points XX.X%

by funding funding billion side, meaningful costs in which stabilize.Additionally, you fueled increased a as on end our can of well costs moderate first average for deposits as to quarter growth previously our our year continues accounted reductions direct-to-consumer XX% total disclosed. are right to chart, the deposit funding as are XX% to Direct-to-consumer see unsecured debt beginning bottom of the the as improve, $X.X from On we to ago. up seeing mix as funding deposits,

to objectives.Moving grow will and X. anticipate will steadily, secured funding long-term sources, diversified our direct-to-consumer credit of and efficiently Slide we we flexibility to on deposits While fund continue our the that growth opportunistically including funding to maintain wholesale

in Our delinquency X.X% credit and a fourth rates rate the XXXX.The compared X.X% rate X.X%, a quarter result XXXX for the growth was and quarter of of our was are tightening the fourth compared payment in net ongoing beyond rate quarter quarter macroeconomic to the from quarter tightening to trend expectations. quarter the ongoing showed responsible The seasonal impacting slower pressure last and to linked was X.X% for the down stabilization first as quarter loss loss denominator. challenging net decrease The level and loan of actions. signs more improvement elevated consumer first as due well credit of conditions, first in year's

high will X%, year, rate inflection the half dependent. delinquency, and have the will with around remain the We rate the for loss optimism to in the point second peak the confidence year.Given net second of the the net loss degree in at the of macro improvement quarter May we in that marking of expect improve XXXX

quarters reserve quarter seen sequentially expected, decreased first As the we transactor to outlook. weighting the the with rate credit of macroeconomic economic see of the intend returning as and model scenarios a in in to conservative improved maintain in in our delinquency X XX.X% XXXX.We first reserve improvement balances rate until to increased seasonally levels sustained

is credit continued inflationary as risk XXX+ product prudent score mix, tightening above credit This pre-pandemic of percentage result improvement levels actions distribution our as our mix. of a our pressures. at despite remained with cardholders well the more Looking diversified credit

and sheet we continue manage compensated our we the to for to risks We our XX. risk are balance proactively credit to protect take.Moving Slide ensure

by and balance enhanced our returns. resilience balancing We our have credit strengthening with significantly sheet risk financial

evident resilience losses we earnings, elevated this as Our our was despite high-quality book financial value. generated growing quarter tangible

XXXX. our sheet balance rate our than regulatory and rate CECL parent strengthening to reduced than commitment level, reserve.Our X Our day loan our basis loan highlighted growing conservative ratios by XXX capital loss higher is loss is in debt points reserve more

loss divided quarter was Our arise. of margin adverse total absorption end-of-period credit our strong equity XX%, providing should protection end more losses which tangible by as allowance capacity, a loans for plus conditions we define economic common

to across new of cycle resulted year We XXX, year-over-year continue nearly than approval in management to account to strategy than lower line The credit risk X XXX acquisition rates improvements closures through priority, manage lower account to segments, and line credit are up of continued basis of average of ability our now exposure. cycle. life a financial so a Delivering product's and We our value ongoing accounts VantageScore sustainable last points vulnerable line uncertainty.Finally, XXX profitable sales shift basis our Slide from drive new proactively risk mix necessary.On pre-pandemic. points driven disciplined, XX% risk economic in than account products.Additionally, to our provides co-brand more growth our have remain management product a The our as risk the credit credit for has which from risk-adjusted coming full confident outlook. also time points economic disciplined mix. is requires credit our tightening if and basis, by XX of reduced even increases than paused have remains the growth more and doing all decreases and proprietary during we periods XXXX slower responsible, prudently rate also expanded in of top

our impacts late We outlook have to XXXX include the rule. potential updated final CFPB the from fee financial

implementation rules we it timing, felt legal remains provide implementation of assumed helpful a uncertainty a with the the outlook final outcomes regarding year would full be May and While to XX proceedings the regarding date.

the Our inflation, and term.In as rate spending near continued to slightly acknowledge half the X of credit We in likelihood sales Federal conservatively interest a our further that loss the and pressure increasing an credit remain still in year, total rate consumer consumer net interest tightening, longer, growth tailwind our outlook loan outlook Reserve assumes by net interest more pressure and credit revenue slower the would for contemplates to potentially losses. ability slight growth result both a of XXXX be loan ongoing decreases to which of persistent which also moderation second is but pay indicate expected which will pressure rates addition, continue in and which growth would margin, higher resulting spend, would expect net to a and visibility tightening our percentage pipeline, to be economic actions, higher single credit gross on on XXXX to outlook, low new our credit basis current business proactive down into losses XXXX. relative we average loans digits Based income.

revenue. Moving to I X outcomes. possible will share

First, legal implying does take XX. May decision not where in a CFPB effect the a before fee stay XXXX, scenario

last excluding to rule we in year, digits a rule excluding current on growth, reduction for our assuming CFPB into go fee the XX; full updated our year-over-year to growth assumes on be X effective late portfolio sales our on mid-single high-teen in we consistent in for earnings call projected line lower higher The the Second, revenue higher fee originations goes updated and this into is the late gross not range. inclusive interest guidance. scenario, the rule. for to current third, effect and down guidance, previous by effect of first, year anticipated next losses, fee on by May hypothetical outlook, to sales the October of for to lower effective average X gain assuming which be date the discount January.So we the is reductions from expected merchant is revenue comparison and lower our down mid- Reserve.In portfolio shared driven a May a loans, guidance does fees interest around is are Federal year, expect ticket big Full CFPB rule with revenue reversal which year XX gains due what XXXX, total rate date

the XX estimates assuming range late total effective Additionally, results. and fourth mid-teen will XXXX.Our the expected in a reduce isolated mitigation believe fourth we actions when positively still quarter on of the impact quarter CFPB fee an May rule relative to revenue basis year's fourth net at looking quarter of of year to this are that is date, the specifically this

is our and rule since we The October XXXX, our updated the be on continued impact X, fourth temporary expected from on revenue earnings details to fourth improvement assuming final quarter a net progress date the basis actions. rule to and that Lastly, is stay of to of made hypothetical a quarter announced call reduce final XXXX XXXX XX% was total using fourth granted effective would approximately now XX% the we the of estimate highlights have an isolated quarter mitigation incorporates XX% the by rule released. the relative

of in the result discussions a of on levels full our clarity our mature. lessen As implementation, timing the of we rule spectrum over impact in pricing expect actions.We the of partners financial time our have are of and regarding the actions and customer higher with late to continue brand fee actions as confidence mitigation of success phased

to expect the expenses excellence. and As focused are XX date periods.Going for ensuring preserving our we over late products, banks focused we throughout and on of to profitability mid-single on year to we as mitigating digits and safety soundness rule, for our CFPB the back operational our and our actions evolve long fee discipline of term effective down total a May the scenario guidance expense adapt noninterest all remain low and be program returns

strategies updated for guidance. included mitigation will are late expenses and we in innovation efficiencies. year, modernization, CFPB continue to include expense.Estimates our advancement we the In that expect future and to technology As these Ralph product growth highlighted, in certain fee digital additional strategically drive invest

for quarter XXXX, rate a inflation to the in We net their range continues around spend. X% to at in ability and X% peaking second expect pressure consumers' the as loss moderates pay low

impacting and loss inclusive is rate. outlook ongoing expected growth actions tightening net of our the slower Our credit

We assume XXXX a gradual modest loss result as are versus we lower of I a year. improvement projecting and have the actions conditions credit the half of rate second and the first the in half economic throughout taken

variability XX% In full due XX% to range the Finally, higher range fee previously the trade-offs successfully through to change, ability confident XX% continuing macroeconomic effective be closing, our long-term in while challenging rate lines will stakeholders. certain now return to this are regulatory strategic XX%, tax to CFPB late earnings of now manage guided due value items. rule make ready before tax. to in we than is our Quarter-over-quarter to for we are risk to to continue our normalized open questions. year expected for the discrete drive and of timing environment lowering investments to up Operator,

[Operator comes from Our question of Mihir Bank line you. with of Instructions] Thank the first America. Bhatia

you some are and to the Just worked wanted are first right? kind all have mitigation actions response happened maybe still have you pushback? rule happened of late I seeing? what's you're about What you to customers, already a planned talk has actions and from already? well? retail be just start are trying to taken the I you And hearing seeing you guess, where of what What The with couple taken? what -- fee seeing here, what's And is understand just things what Like partners? versus of

chime I'll Perry and to I'll Ralph. in. ask It's Yes. start

made to pricing already certain And inclusive So actions and we partners. discussions date some diversification. portfolio have actions, mitigate to ongoing of with and policy our taken changes. fee We've then we've our product

dramatic. longer-term that that be we need a so haven't kind It's But with thought from caution of about us. seen we haven't So we to anything early what days, a behavior anything to far, we take that. seen view we would that, It's see. I'll would customer alarming perspective,

you want with the executed by that partner frankly, making seeing. working partners as that's and changes reality forward. this realize we is accepted now, we Our quite to sure the us could But that a well are and anything collaboratively Perry, what and add? what have that, we're the to make move they're changes are and us be to

Yes.

a pricing around of see last I think half you you APRs. tell little just at into terms some us color, mean, of step I that actions higher the I'd end started to take more year, in a

dislocated over APRs an that. As call going index. the that not think the I And it a the like market.So in rule example, on along. rate the cap we was not but up prime removed will don't above state with was final now a soft the to on that you're end came it date a step because half again, you from We happening. APRs there well, XX.XX get taking -- where be, And what was increased to seeing want spread the

it Ralph You're additional seeing more policy pricing fees and marketplace, coming with and inclusive the see the you'll it mentioned. in of in changes, us actions months, as

to And then bit credit just switching little maybe side. the on a

in bit expecting I obviously on more And little not to of higher. greater you've You're But credit at wanted X, a than taking I here. -- been distribution peak tighten the piece dig getting underwriting. guess to credit when to Slide XXX is look -- taking I credit actions the

like with which taking I'm tighten saying understand to credit, the to that you've trying credit a that in credit like not -- little to improvement we're we see actions can you're some me bit? to seeing of is delinquencies. I'm taken you're not basically actions, square But the you circle. actions. distribution Like rate. the trying delinquency help So help And improve going risk that

Yes.

pre-pandemic. our our proactively cycle, to from average And life been. entire our And line credit rates higher XXX is ever to think across account basis, it been today basis new XX closures. a than we've our risk-adjusted you are So it's on acquisitions if approval points risk basis than VantageScore management lower points strategy about nearly the lower than managing account

we're where we increases [indiscernible] prime the sometimes expanding and to prime -- some So line decreases line pausing plus, sometimes higher. and think are we We appropriate.

and right difficult get to so make people proactively we proactively however, inflationary So they overextended sure isolate it's a -- the move forward. to this don't as lines manage But but assign we've broad-based continued pressure lines, remedy.

doing thing looking chart, risk put is scores more we And one coupled Ralph what coming the happened then the those best the about have protect the I'd is just line higher risk FICO So the few spoke all that book what's to an we've that right? said, right? base.But lower new environment -- you accounts existing add or score seen, years this, we're When in higher accounts risk Ralph with things migrate on at quality distribution were everything past credit to you're like downwards. and happening risk you migration, in that in that assignments, on at as their risk the scores

So see of that's causing of you the is what's not reflective that improvement fully actions to taken. all we've the

actually it's that fact the we have put actions reflective is the of in that place. all So stabilized

comes of Sakhrani with the Sanjay Our next line from question KBW.

it's that lower? with much even path done be just the about you actions, can offsetting as quarter. impact able early on could here in impact as then roughly like into Maybe Perry, to there time lower? possible the And help fourth of could you today? back that future, the the sit of what get would you quarter the Just line be get you've very maybe, talk positive you mitigate obviously, it the Like to to entire is how these it been work mitigation as impact even fourth is the

feverishly is help Yes. think partners in can with policy to changes close things other that of terms that to and coming path team working that with I brand terms the nonstop would other gap. impact, I'll of, in reduce up to I to But that. say continue And we this was? on time then we're give as and in your second the of our to trying continue front into point. us, expect And question we the say, view move you implement improvements at XXXX, of what's to see part the best

Yes.

guys you Just XX% XX%, is -- XX%, that even a that potential like it best you there Or the like sort work at as down as Like doing? of quarter? got XX% is can with can you to point? early lower that how fourth be down the much are cut this the the

the still I ongoing negotiations. think There's of final into we line have sight partner rule.

the the in that have So those have to with their APR information. changes part effect. more we'll said as update and that we've other just for takes right, And full of we it this is burn before, then time is,

While some right confidence it's bit, material we what have fees movements from but a have little impact, to high expect now, but that the improve obviously I near-term possible we've get implemented the don't reflected that. for in

Got it. Mihir slightly Okay. your better. the just but just one reserve not And was asked think higher. know the question. on credit went if consistent, I I that outlook credit, rate, And about

drives rate Just as this we look ahead, reserve what forward? going

CECL lot better, But came point, I some reserve losses lot model. model been to and that's quarter was I there's that of It And quarter right? We a Yes. that of XXXX the it's modeling.We steady in early delinquency and the imagine, And the I reserve expected didn't also cared interesting, down, appreciate and from all but the this that mean are higher our question. weightings. the think first pretty your the didn't a and this that basis peak change points, in complexities assumptions and change would think is. X of stage a by you has you're for. the as about moved around go second And into in is few was rate, you basis of to about output did risk the rate materialize. up go if points what already And

surprisingly, separation was model runs changed risk and adverse baseline really didn't outlook between not It's transparency. reduce larger flat, the a little. by like overlays economic adverse in right seem And into time that through when this the full keep severely a a to outlooks what creates overlay bit little to and a ton. number the So just it model, the the weightings weighted the the overlay.And that it get

the reserve year So what in the mirror are improvement and we the with rate see exited as delinquencies we I should lower than and a my would losses peak rearview reserve to XXXX. expectations what are in exit expect rate, the start some second to improve, quarter the

comes Orenbuch the Our from Cowen. of TD next line Moshe with question

Because And actually little XX? Great. taken? -- the takes some the trying scenarios, about kind fee And what would that I'm talk to just that the steps back taken already into you and to late said through May which the a things getting with you've by that be The bit, on long X Perry, you earnings? of of be parse issue, to that flow different expect helpful. the about you've could steps how

Sure.

at time taken, of were earlier, as discussed that increases I that flight you now in is the to APRs So accounts, come in. on through early mentioned it on accounts. existing been and already the to those takes for see what for some new you're APR some transactions base have those and higher increases actions new burn have APRs before, as in going And further

fees. introduction partners, will the in statement into the I'd with market say, way You'll starting, an of a roll different sequenced That see few in months. next

market changes the that, And they additional the when a value hit start to And on will like. later in underwriting happen to and things then product of fees And fees really, next so the matter then you'll of on you'll and purchases promote strategy that the some timing see some perhaps that -- early into ticket that of have. year. it's these start top will other could year changes have and big and

really mean, -- as credit change be your you in credit you've for that What on just mean, over last think you about the impact do on and it things to be as have the takes talked of year the closer much a for -- inflation lot like And think Okay. about base. -- how customer metrics? a it side, and a the situation? I to your about thought that normal continued is time? could a reflected growth, Like in how do wage I

of see where in reversed encouraging, couple months And Yes, to kind continue growth. a it's I question. of was but I'd look like bit to it there's a it was a this improve. love cumulative a which actually that that is course had wage closing, March. at, then gap little something chart quarter and we -- inflation which between a to great that It's

we the growth your them consumer, mean, over those the inflation part to particularly point, they're wage encouraging is is what not relief.I up outpacing end we'll for good So can that's levering. serve, that spend are to to use to their things and they're I able and into the trying their giving make best finances. mean discipline that sure repurpose do nondiscretionary they're really they manage

lower I interest But help consumers rates broadly. will unemployment has obviously, good. think help, been that more

and credit And I'm think then then taken, better future. that on of have I actions also for delinquency a improve as putting start us, tailwind of to optimistic economy you And the tailwinds of and will So book the our a losses. the we've be improved see then some to restrictive that outpaces the more the with line able will which to unwind wage start through, increases, well. growth as to us be growth approvals inflation, you'll the come

Bill Our with next Securities. line Research Wolfe the question of from comes Carcache

Ralph and Perry.

thinking you're in return Can Following business? up about the discuss on side Sanjay's both you of earnings that's evolved to implementation, we of ROA generating will the other terms look mitigate the to ROE. and effect. and of about take how the How question as ability it power long how

there You that and product mentioned, Perry, some changes. would underwriting be

impacting you overall Just returns how -- and that that profitability. see curious

Yes.

chart I goal think the that we've this. to the the before And we response on back of direct side APR all other into effect, is my that that strong what returns if to is and go particularly what APRs, you I said changes is the Investor with put would pricing our recall one as and obviously through. give value for that we'll changes as is way to possible, there But fast returns, strong APR our back years our to a of goal conferences the on more takes its guidance to at get out Day. of full investor work at few deliver it

see And view CETX of ratio. How And initial some on then thoughts come to your at what know not currently currently, XX.X% during we you sort capital would we Okay. compare you're XX% but now. loans I largest probably your will approaching separately since more peer aggressively? does the target? this Day, you a aggressively relative that maybe where level up targets you're Investor capital, an as return could are growing longer-term

Yes.

And a Everybody to know I that have I has on peers. compare all want at you CETX. Investor more we different we but in and for would that it's Day, give different that improvement ourselves capital will structure. room tell You more we direction stack nailed to

So we constraints. binding all have different

that go we'll Day. through So more our Investor at

from [Operator Instructions] question Thank next comes Our you. Jeff Morgan with Stanley. the line Adelson of

board view I you're potentially seeing confidence think But why more that, that in held the Are you lower more some anything know on expressing was Just of through. less what here and the I until X Perry, retailers kind that than on I coming come just more rule noticing like were this now that on out sitting of might came wondering maybe in have before holding mentioned XX%. if of you kind than on we hey, XX% kind could out just we're head weeks through? to doing you're a plans your speak yet? came actually maybe there. little it prior with the looks away, retailers progress retailers bit given

deliver more really pretty to clarity and lot It's them. based where clarity past days rule were agreements that of And and we were going more Yes. long with degree those estimate, we a XX over as initial give in with we terms with a out. execute estimate XX the it what time right? partners When discussions we our we final -- And partner well to ago, discussions. actions we what of brought the final to have on our had process. rule try into of the happen an this of days, as gave you summarized more to partners in we it's confidence and and that could believe the well, came

continued So it's really just progress.

have potential earnings back the wondering, the but how of COVID period May in to might this of for to of Got the I'm about think impact about dividend for, it. And temporary peers you from kind the just EPS one And whether or lack thought stop had dimensionalized that? you think I have date? your XX impact the dividend

I what revenue before impact. expecting to dividend. that But tax. see in to place the through a earnings impact no, At there's was provided do there we not this flow any assume We're our you can dividend that. on I'm good be impact will not a point, And

with Our next the JPMorgan. comes Smith of Reggie question from line

all the unmitigated question what appreciate the follow-up. in to the and I different have quarter? disclosure scenarios. My then the you fourth would my a impact I And guys of question disclosed is, have be

will right? how go the late in hand is the through in flows P&L to because obviously, applied, act will kind that it glove, in impact combination This the new they a through reduction because fee tandem. -- haven't we they -- all No, actions really, flow be pricing of, and will of

if know income higher don't versus maybe could co-brand scores, calling about weakness, different label. I trends spending you kind any maybe [indiscernible] spending out of your then worth if Got subject, was a some give FICO could I trends talk Are like was there? different of And it. switch looks maybe cetera. Understood. pockets. little on what your you private et guess, hoping within I I hoping, texture there the

that. some you nondiscretionary chain, in people and have this and you and overextending plus you'll spending type and people see FICO down capacity, the budgeting on And It's of on So Vantage they what not prime focused you would as your economy, move are items more right? spending or see prime they're and focusing expect themselves.

we're what So that's seeing.

probably the we're our look some big-ticket spend, lower is seeing if nondiscretionary you're co-brand on So seeing as items, co-brand spend and at you well. spend

rather have could around is the so be your FICO tiers, could that sneak different losses and the Is kind Any losses diagram about lower one way that year represented helpful your shows of that in disclosed bulk we slide X on the losses in, color and fall on disproportionate obviously obviously, can provide kind kind bands I the one a guys the imagine, of of would Slide there -- half between the or the if back different FICO how think a you as you would moment. last And of of buckets. I those relative how weighting? migrate.

it I question, is the band, lost future. what risk said bands, basically about you don't losses though that well, indicative think, drive you risk the in And though. as one, by risk of about as good think scores you But think before, because no, -- we may provide losses. I the losses I have one

as that indicative we risk of the should overall be future see So scores, improvement in improvement well. as

period scores how risk we're despite back a that move up. in as will migrate of there's where down actions. Right migrating be risk scores the some improvement cycle, they're will throughout And cycle risk our the in now,

John comes question next Pancari from ISI. of Evercore line Our with the

running an earning after-tax bottom that I gave of you that year loss. line that the the your Does impact initially in heard XX implies implementation, net any either the expect math regarding not basis? XXXX mean Because in that math you you'll Jeff's impact a to question this So not answer May earn dividend. that or be you that the the could dividend your on the should scenario in money

And your so I to there. thoughts want just get

Yes.

with that actions use how would approved plan we capital. We have capital a that and on we can take flexibility

not at anticipate is the we're where reduce need or expect So dividend And we point. the this do again, that at. to

year. possible the then a like that said, for is to confidence the putting that just Is back when on mission earnings running underestimating we be scenario? the -- And XX math Okay. positive potentially could net something I in to at loss gives you the run that that May being you there some

future clarity year. going the in of from have around you give discussions. back think earlier more I'll that of one tailwind I losses But part a when said, to about improving the the really, things in the we're

you have reserve and responsible have the losses, will you year, And also have expected throughout our You reversal less of consistent with an rate growth. improving reduction interest fees.

for year. think I aid will So things negative a earnings having in, I'll say, those all post the not to hopefully

back it pass now closing I'll you. remarks. Thank Ralph Andretta to for

thank everyone, we, of to you Financial. and And next our and joining interest Bread speaking have in call for forward all with much, a quarter. look today very course, you you Thank And for again terrific day. your

This concludes Thank today's your call. for participation. you conference

may You disconnect. now