Adam Gault
Evercore ISI updated Bread Financial Holdings (New York Stock Exchange:BFH) to In Line from Underperform after the credit card company's investor day highlighted strengthening performance across tangible common equity trajectory, better visibility into impacts of the late payment fee rule the CFPB and an intact credit outlook.
Management's medium-term ROTCE target range in the low to mid 20% “was well received by investors and compared favorably to Evecore ISI and Street expectations,” analyst John Pancari wrote in a note to clients. . “Importantly, this outlook already incorporates the impact of the implementation of the CFPB's (Consumer Financial Protection Bureau) late fee rule and related mitigation.”
The company expects the implementation of a late payment fee rule in October 2024 to reduce fourth quarter 2024 total revenue by approximately 20%, net of mitigation.
The analyst is also encouraged by a recent Fifth Court of Appeals ruling on Tuesday that kept the U.S. District of Northern Texas as the site of the Chamber of Commerce's lawsuit against the CFPB's late payment fee rule, rather than allowing it to move to Washington, DC. . That “bodes well for the industry's backlash against the rule,” he said.
As for the credit outlook, “while pressure remains, we are confident that losses are peaking and trending within management's expectations,” Pancari said.
Evercore's In Line rating on Bread Financial (BFH) matches the SA Quant rating and Wall Street Average rating, both at Hold.
