Adam Galt
Evercore ISI upgrades Bread Financial Holdings (NYSE: BFHThe credit card company’s rating was revised to market perform from underperform after the credit card company’s investor day highlighted strengthening returns on tangible common equity, increased visibility into the impact of the CFPB’s late fee rules and an intact credit outlook.
Management’s mid-term ROTCE target range of around 20% “has been well received by investors and compares more favorably to Evecore ISI and Street expectations,” analyst John Pancari wrote in a note to clients. “Importantly, this outlook takes into account the impact of the CFPB [Consumer Financial Protection Bureau] Implementation of late fee rules and related mitigation measures.
The company expects the late fee rule implemented in October 2024 to reduce total revenue by approximately 20% in the fourth quarter of 2024, net of mitigation measures.
The analyst was also encouraged by a recent ruling by the Fifth Court of Appeals on Tuesday that retained the U.S. District of North Texas as the venue for a Chamber of Commerce lawsuit over the CFPB’s late fee rule, rather than allowing it to be moved to Washington, D.C. He said this “bodes well for the industry’s resistance to the rule”.
Regarding the credit outlook, Pankari noted, “While stress persists, we are confident losses are peaking and trending in line with management expectations.”
Evercore’s In Line rating on Bread Financial (BFH) is in line with the SA Quant Rating and the Wall Street average rating, both of which are Hold.
