Bread Financial Caps 2025 with Strong Growth, Eyes Further Diversification and Tech Investment

COLUMBUS, Ohio – Bread Financial Holdings, Inc. (NYSE: BFH) closed out its 2025 fiscal year on a solid note, reporting financial performance that aligned with its targets and underscored a year of strategic execution. The company, a leading provider of tailored credit and payment solutions, attributed its strength to a combination of new partner signings, a favorable shift in credit trends, and disciplined capital management.

"Our 2025 results reflect our commitment to responsible growth," stated CEO Ralph Andretta during the earnings call. He pointed to the addition of seven major new brand partners and the renewal of key existing programs as core drivers. Significant inroads were made in the home goods vertical with partners like Bed Bath & Beyond, Furniture First, and Raymour & Flanigan. The company also expanded into new arenas, launching a program with Crypto.com and establishing Bread Pay installment lending relationships with Cricket Wireless and Vivint.

Renewals underscored the strength of Bread's partnerships. The company extended its deal with Caesars Entertainment, ensuring all its top 10 programs are now locked in until at least 2028. Andretta highlighted the recent launch of an enhanced, fee-based Caesars Rewards credit card as an innovation designed to deepen customer engagement.

This strategic expansion is deliberately diversifying the company's revenue streams. Co-brand credit sales represented 52% of total credit sales in Q4, up from 48% a year ago, helping to spread income sources and associated risks.

Financial and Capital Highlights

For the fourth quarter, Bread Financial reported net income available to common stockholders of $53 million. Adjusting for a one-time, post-tax expense of $42 million related to debt repurchases, adjusted net income stood at $95 million, or $2.07 per diluted share. Tangible book value per common share saw a notable 23% year-over-year increase to $57.57.

The company was active in returning capital to shareholders, repurchasing $120 million of its common stock in Q4. For the full year 2025, total capital returned reached $350 million, including $310 million in buybacks. Bread Financial also raised its quarterly dividend by 10%.

CFO Perry Beberman detailed progress in fortifying the balance sheet. Following credit rating upgrades, the company executed a favorable debt refinancing, issuing $500 million in senior notes at 6.75% to pay down $900 million of higher-cost debt. "This reduced our rate by 300 basis points and shrank the note size by $400 million," Beberman noted. A $75 million preferred share issuance in Q4 further bolstered Tier 1 capital.

Deposit growth remained a bright spot. Direct-to-consumer deposit balances grew 11% year-over-year, marking 20 consecutive quarters of growth. These deposits now constitute 48% of average total funding, up from 43%. Beberman stated the long-term goal is to shift this mix toward "levels more in line with larger peers," targeting over 70% of total funding from this stable, FDIC-insured source.

Credit Improvement and Consumer Trends

Management emphasized sustained improvement in credit quality. The full-year 2025 net loss rate of 7.7% came in better than expected. Q4 metrics showed continued progress, with a net loss rate of 7.4% and delinquency at 5.8%. The reserve rate improved to 11.2%.

"We are not seeing a general loosening in underwriting," Andretta asserted, explaining that the company continues to underwrite "for profit" while making gradual adjustments as the credit environment improves. Beberman added that early-stage delinquency rates are now below pre-pandemic levels, a positive signal for future loss trends.

On consumer behavior, Andretta noted credit sales rose 2% year-over-year in Q4, driven by higher transaction values and frequency. Spending patterns showed resilience in travel and entertainment, even as consumers maintained a focus on essential purchases.

2026 Outlook: Modest Growth Amid Economic Crosscurrents

For 2026, Bread Financial's guidance assumes a resilient consumer, inflation persisting above the Fed's target, and a stable labor market. The company anticipates low single-digit growth in average credit card and other loans, supported by its partner base and new launches.

Total revenue is also expected to grow in the low single digits. The net interest margin is projected to be near to slightly above the 2025 rate, with benefits from pricing and lower funding costs partially offset by expected Fed rate cuts. The company guided to a 2026 net loss rate between 7.2% and 7.4%.

Beberman confirmed expectations for positive operating leverage in 2026, excluding debt repurchase impacts, even as the company continues to invest in technology modernization and AI.

AI Integration as a Core Competency

Andretta provided insight into Bread Financial's technological edge, revealing the company has over 200 machine learning models in production and has deployed automation that saved over 1 million hours of manual work. More than 60 AI initiatives are underway, focusing on areas from fraud detection and underwriting to call center efficiency.

Expert Commentary

"Bread Financial's results demonstrate a well-managed transition towards a more diversified and deposit-funded model," said Eleanor Vance, a financial services analyst at Horizon Advisors. "The credit improvement is particularly encouraging and suggests underwriting discipline is paying off."

"The capital moves are smart—locking in lower rates now is prudent," added Marcus Thorne, a portfolio manager. "Their deposit growth story is underappreciated and provides a real cost advantage over time."

"Another quarter of executives patting themselves on the back while guiding for low single-digit growth," countered Diana Frost, a vocal commentator on fintech trends. "The 'responsible growth' narrative is wearing thin. Where's the breakout innovation? They're adding home goods stores and talking about bots—this feels like incrementalism in a disruptive market."

"The focus on AI and automation isn't just hype for them; it's directly impacting efficiency and risk management," observed Raj Singh, a payments industry consultant. "Their platform approach with Bread Pay is a strategic move to embed financing deeper into the commerce journey."