Bread Financial Reports Economic Pressures Driving Higher Delinquency Rate

Bread Financial Holdings reported that its credit card net loss rate in September was slightly lower than it was a year ago while its delinquency rate was higher.

The net loss rate for the month ended Sept. 30 was 6.7%, lower than the 6.9% for the three months ended Sept. 30, 2022, the financial services company said in a Thursday (Oct. 26) press release.

The delinquency rate as of Sept. 30 was 6.3%, higher than the 5.7% recorded a year earlier, according to the release.

Both metrics are higher than they were before the pandemic, Seeking Alpha reported Thursday. In September 2019, Bread Financial’s net loss rate was 5.3% and its delinquency rate was 5.9%, according to the report.

The rise in the delinquency rate during the third quarter was expected and was driven by continued economic pressures, Bread Financial Chief Financial Officer Perry Beberman said Thursday during the company’s quarterly earnings call.

“The third quarter net loss rate was elevated compared to last year’s due to more challenging macroeconomic conditions pressuring the consumer’s payment rate, as well as actions taken to the transition of our credit card processing services in June of 2022,” Beberman added. “That benefited the loss rate in that quarter.”

Looking ahead, Bread Financial expects the fourth-quarter delinquency rate to be fairly consistent with the third quarter and anticipates that the fourth-quarter net loss rate will be about 8%, “driven by normal seasonal trends, continued consumer payment pressure and the denominator effect from lower loan growth,” Beberman said during the call.

This report comes a day after digital marketplace bank LendingClub reported that its net charge-off ratio rose to 5.1% during the third quarter, up from 4.4% in the previous quarter and 2.1% a year earlier.

Data from supplementals and Securities and Exchange Commission (SEC) filings for some of the payment networks and banks showed that delinquency rates were rising in the spring, PYMNTS reported in May.

This dovetailed with PYMNTS’ findings that for consumers, credit cards have been a lifeline in managing daily expenses, but it is getting harder to keep up with those obligations.