Impact of Enterprise Acquisition on Capital and Earnings Dilution
The acquisition of Enterprise Bank added approximately $4.1 billion in loan balances and $4.4 billion in deposits.
Anticipated 8% to 9% dilution to tangible capital on day 1, slightly lower than initial expectations due to contracting interest rates.
Longer-term rates contracting has led to a reduction in expected dilution and earnings accretion impact.
The final guidance on dilution and earnings impact will depend on the finalization of purchase accounting adjustments and FASB guidance on CECL double count, expected later in the year.
Average loans decreased 1% to $17.7 billion due to macroeconomic challenges and elevated gross credit losses impacting loan growth.
Bread Financial reported adjusted net income of $149 million and adjusted EPS of $3.15 for Q2 2025, excluding $10 million post-tax debt repurchase expenses.
Credit reserve rate improved to 11.9%, a 30 basis point improvement year-over-year and sequentially.
Credit sales grew 4% year-over-year to $6.8 billion, driven by new partner growth and higher general purpose spending.
Delinquency rate improved to 5.7%, down 30 basis points year-over-year; net loss rate improved to 7.9%, down 70 basis points year-over-year despite hurricane impacts.
Direct-to-consumer deposits grew 12% year-over-year to $8.1 billion, accounting for 45% of average total funding, improving funding mix.
Net interest income decreased 1% year-over-year due to lower billed late fees and a shift in risk and product mix, partially offset by lower interest expense and pricing changes.
Net interest margin was 17.7%, down 30 basis points year-over-year, impacted by elevated cash mix and lower loan yields.
Noninterest income increased $3 million, mainly from paper statement pricing changes, offset by lower net interchange revenue.
Return on average tangible common equity was 22.7% for the quarter.
Revenue was $929 million, down 1% year-over-year, primarily due to lower finance charges and late fees, partially offset by lower interest expense.
Total noninterest expenses increased 3% year-over-year to $12 million higher, mainly due to $13 million debt extinguishment costs; adjusted expenses were nearly flat.
Cross-border volume increased 15% globally, reflecting growth in both travel and non-travel related spending.
Domestic assessments were up 9%, cross-border assessments increased 15%, transaction processing assessments were up 18%.
EPS was $4.15, including a $0.09 contribution from share repurchases.
Net income and EPS increased 12% and 14%, respectively, driven primarily by strong operating income growth, partially offset by a higher effective tax rate due to global minimum tax rules.
Net revenue growth was ahead of expectations, primarily driven by higher-than-expected revenue from FX volatility.
Operating expenses increased 14%, including a full ppt increase from acquisitions.
Operating income was up 17%, which includes a 1 ppt headwind from acquisitions.
Outside the U.S., volume increased 10% with credit growth of 9% and debit growth of 11%.
Payment Network net revenue increased 13%, driven by domestic and cross-border transaction and volume growth.
Second quarter net revenues were up 16% and adjusted net income up 12% versus a year ago on a non-GAAP currency-neutral basis.
Switch transactions grew 10% year-over-year; contactless penetration now represents 75% of all in-person switched purchase transactions.
Total adjusted operating expenses increased 14%, including a 4 ppt impact from acquisitions, driven by spending on strategic initiatives.
Value Added Services & Solutions net revenue increased 22%, with acquisitions contributing approximately 4 ppt to this growth.
Worldwide gross dollar volume (GDV) increased by 9% year-over-year; U.S. GDV increased 6%, impacted by lapping of the Citizens debit portfolio migration.
Dafinchi