Bread Financial CFO Says Margin 'Probably Peaked' This Year, Sees 2027 Flat To Slightly Down
Perry Beberman said safer card and installment products carry lower yields, and next year's operating leverage could be thin.
Bread Financial's margin gains are behind it, CFO Perry Beberman told analysts on the company's third-quarter earnings call Thursday: "I'd say this year we probably peaked in full year net interest margin." Bread, which issues co-brand and private label credit cards for retailers and also offers installment loans and savings accounts, expects next year's margin to be flat to slightly down.
Safer products, thinner yield
Beberman, the company's executive vice president and chief financial officer, gave two reasons for the drift. Improving credit means fewer billed late fees. New accounts are also tilting toward co-brand, proprietary cards and installment loans, which he said "come with less risk, but also means lower assigned APRs" and fewer late fees.
He told an analyst from Keefe, Bruyette & Woods that fourth-quarter margin will come in below the third quarter on normal seasonality, as transactor balances (customers who pay in full) rise. Third-quarter margin was 18.9%, essentially flat from a year earlier. He added that he feels "pretty confident" risk-adjusted margin will "look pretty good for next year," since the mix shift lowers losses.
For 2026, the company expects margin slightly above 2025, average loan growth of about 4% and revenue growth of about 5%. It also lowered its full-year net loss rate guidance to between 6.9% and 7.0%, from 7.0% to 7.1%.
A possibly thin year of leverage
Asked by a Wells Fargo analyst about expenses, Beberman said Bread remains committed to positive operating leverage, meaning revenue growing faster than costs. But he said: "It could be a thin year in positive operating leverage next year because this year is coming in pretty strong." He cited heavier technology and AI investment.
Third-quarter net income was $156 million, or $3.82 a share, down 17% from a year earlier, when a $38 million favorable tax item flattered results. Pre-tax income rose 6%. Revenue grew 5%, and end-of-period loans rose 7% to $18.9 billion.
Deposits, capital and buybacks
Consumer deposits reached $9.9 billion, up 21%, and averaged 53% of total funding versus 47% a year ago. Beberman said the long-term target is 60% to 70%, which will take a number of years.
Bread bought back 700,000 shares for $75 million in the quarter, with $374 million left on its authorization. Beberman said to expect minimal repurchases in the fourth quarter absent a preferred stock offering, as capital funds seasonal loan growth. A window for a preferred issuance opens, he said, "I want to say next Monday, but again, who knows what the markets will look like."
Bread shares traded at $103.84, down about 4% from the prior close, in Thursday trading, according to market data.
Beberman put the capital target at a CET1 ratio of about 12% to 13%; it ended the quarter at 13.1%.
Sources
- Bread Finl Hldgs Q3 2026 Earnings Call Transcript — benzinga.com
- Bread Financial: Q3 Earnings Snapshot — Associated Press
- Bread Financial (BFH) Q3 Earnings: What To Expect — Yahoo Finance
- What Analyst Projections for Key Metrics Reveal About Bread Financial (BFH) Q3 Earnings — Yahoo Finance
- Bread Financial (BFH) Reports Q3 Earnings: What Key Metrics Have to Say — Yahoo Finance
