Bread Financial Holdings, Inc. (BFH) Earnings Call Transcript & Summary

For those who don't know me, I'm Mihir Bhatia. I cover consumer finance and payments at Bank of America. Next on stage, we have Bread Financial. Bread Financial is a leading private label card issuer. Over the past few years, they have expanded their offerings to provide co-brand and proprietary cards and buy now, pay later loans. I'm delighted to welcome both Ralph Andretta, who is CEO; and Perry Beberman, who's the CFO of Bread. They both are also recently celebrating -- birthdays around now, so you can wish them happy birthday afterwards. But -- so thank you for joining us. Really appreciate you guys doing this conference for us again.

So maybe just to kick things off, Perry. This morning -- we'll start with you, Perry, but this morning, you filed financials. So maybe just talk to us a little bit about Jan results, anything we should keep in mind as we think about January results going into next quarter. I know there's always a step-up in February, but anything else you want investors to keep in mind?

Yes. No, we were really pleased with how January losses and delinquency came in as well as the loan growth coming in flat, which is a nice little bit of reflection. I'm sure we'll talk more about loan growth outlook for the rest of the year. The thing to remember, as you pointed out, is February steps up materially, seasonally. So we -- what we say is it's going to get closer to 8% as you look out for February, and then it'll come back down, and you got to day waiting, just normal seasonality. So that's important for everybody to remember. As it relates to overall first quarter, I think everything is shaping up as we expect. So remind you and others what we said during our earnings call when we gave guidance was that the first quarter will just be slightly down in expenses, noninterest expenses. We had $500 million of expenses in the fourth quarter. It will be slightly down in the first quarter. And I think what's happened, sometimes people look at prior years, where there were some onetime charges in those years as it related to some, say, personnel actions that might have been in there that were not in there. So this comp will look closer. You don't have those onetime step downs. And those are adjusted expenses that exclude the debt repurchase costs. So that's really the only other thing that I want to make sure that you're aware of and investors.

Got it. And we're going to dig into numbers over the course of the next half an hour, 40 minutes or so. But before we do that, Ralph, it's 5 years since you took over the seat, like you said, you had a few good weeks before COVID. So maybe four normalized...

Remember those three weeks finally.

Maybe four normalized years. But as you reflect on it, just how are you feeling about the progress you've made. Maybe hit on like some of the highlights of the -- how -- what's changed, and where is work still to be done?

Yes. I think one of the biggest highlights is to my left, we're having a competent, very professional team. And really, that's always been -- really having a good team to work with has been just extraordinary. But we came out of the fourth quarter really strong. We came out of last year really strong. That's telling for us. We've had a transformation now going on since COVID, and we're closer to it than others, but there's three things that -- 3 or 4 things I'm really proud of. The team we've put together is exceptional. I'm really proud of that. The work we've done on the balance sheet is exceptional, really strengthening our balance sheet and paying down our debt, moving tangible value to barely there to -- I think we ended the year at 57, 57 last year, if I remember correctly, moving that in the right direction, getting rated by the rating agencies, I think, was a great step in the right direction. So all those things really have moved forward. When we first got here, we had choices to make, and it was either do you invest in the business, do you strengthen the balance sheet? Do you return value to shareholders? Here we are a few years later, and we can do all three. And that's a really nice place to be. And we've added really nice partners during the process and really nice products. So we're close to the transformation. We live it every day. I think the market is catching up to that. And our view is, we're going to continue to do the right things, continue to focus on what's important, continue to be transparent with investors and analysts and let them see what we've done.

Got it. Right. So let's talk about your customers for a second. Maybe compared to some of the other companies presenting at the conference, your customer base is a little bit more subprime, a little bit more middle income. Give us an update. How are they feeling? How is the core customer at Bread doing?

Yes. So overall, I think our customer reflects the broader economy. And we talk about the K economy, and where we -- our sweet spot is kind of the middle of the K, right? So you think about the top of the K, those are your super prime customers, the higher net worth, the high spend. That's not who we mainly go after. And then you use the subprime word. That's the lower end of the bottom part of the K. We don't target those as part of our underwriting and the population that we're trying to serve. It's really the middle, like you said, Middle America. And by way of example, the newer ventures we put on have about $94,000 average income. That's truly middle America. The -- when we do underwrite deeper to near prime, some of those customers do fall into that subprime category when they get a little distressed. But again, we're getting paid for the risk we take. Overall, though, that population has been dealing with a challenging macro environment post-COVID, right? They've dealt with now 30%, 35% of compounded inflation, and they've adjusted their decisions. And so when you hear us talk about or others talk about a resilient consumer, these are consumers who have adjusted the way they spend, the way they budget, the way they plan and have done a good job. And the word I would say we use is resilient. I wouldn't say they're strong, but they're resilient, and they're hanging in there, and they've got a hand on their finances, and they're making choices. We talk about a choiceful customer, where maybe they're not going for the top shelf, they're going to the middle shelf or from middle shelf to the bottom shelf or the quantity of what they're buying, but they're doing a good job of being resilient. And so with inflation coming down a little bit, maybe not all the way to target, it's still better than what it was. And that they're able to navigate this. And the job market still remains constructive. And hopefully, we start to see some investment in the jobs that are promised from all the investment coming into this country, better trade deals, et cetera. But I think we're still optimistic on the overall consumers' outlook despite what sentiment is, that's the soft data, hard data says the consumer is resilient. And so we feel pretty good about where things are and should continue to drive credit improvement and continued sales growth for us.

Got it. Now we're going to dig into the numbers and 2026 outlook in a second, and I promise we'll get to that. So -- but before we do that, I did want to spend a few minutes just on the product diversity at Bread. We always focus on the credit card partnerships, the Caesars, NFL card, Victoria's Secret card, what have you. But the product diversity has increased quite a bit. And I was wondering if you could just spend a few minutes, just how you frame -- how you think about it? Like help frame it for us, like when you look at it internally, when you break down the business, what are you looking at? How are you thinking about the different pieces of the business, like the different products, categorize them maybe?

Sure. When -- you mentioned when we started. When I first started here, we were a private label credit card shop. That's what we were. And if you look at us today, we've really derisked our portfolio. I look at it in a couple of ways. It's like products across the enterprise and then verticals where we use those products, right? So you think about the products we have today, we'll have private label, we'll always have private label. We have co-brand, really good product, right? We have direct-to-consumer products, whether it's deposits and our direct-to-consumer credit cards. We have the buy now, pay later platform, where you have the split pay, but more importantly, the installment loan that walks into personal loans. So we have 7 or 8 products that you can kind of lean in into the consumer. And then when you look at the verticals, you've mentioned Victoria's Secret, we have soft retail, we have jewelry, we have beauty, we have T&E, we have home improvement and furniture. We just -- that vertical has just really emerged with the Raymour & Flanigan and Furniture First and Bed Bath & Beyond, but that's a new vertical for us. We have an electronics vertical. We have Dell, HP, B&H Photo. So we have all those verticals, and we can use our products in each of those verticals. So for example, where we have PLCC, we now have a co-brand products that we have both of those so the consumer can earn more points with a co-brand product. If they can't qualify for a co-brand, we can give them a PLCC at a lower line. So we're casting a wider net on the consumer by the products we have. So we feel good about that, and then we continue to grow those verticals as -- and continue to expand our verticals.

So just staying with that for a second, as you expand the product set, what are you hearing from partners? How is the product expanded product set, maybe deepening your relationship with some of your partners and expanding the products you offer? Any resistance and pushback you're getting?

No, because it gives the partner choice. It gives them the ability to widen their net and have better opportunity for people to purchase from them, right? So where somebody wouldn't qualify for a co-brand, they qualify for that PLCC card. But they also -- the partner gains incremental revenue because people are using that co-brand card outside of the partner. So there's other benefits that the partner has. So they're very open to that type of relationship. Two things you want to do with an existing partner, right? You want to increase penetration into their base, and you want to increase that penetration with new and different products. So you can excite that base. And the partner is very open to that. And we're digital first. So we're looking for how do we make digital first and foremost, and how we take the friction out of the process. So the partner is very helpful to that. Obviously, some more than others, but they're very helpful towards that.

Okay. So let's -- maybe, Perry, we'll turn to numbers a little bit. Fourth quarter purchase volumes were maybe a little bit better than we had. I think most of the Street had. Momentum feels decent coming into 2026. January, we saw loan growth positive. It's a good sign, I think. You're ready to call it, we've inflected on loan growth and purchase volume?

I'd like to see a few more months of consistent growth, but this is setting up in line with what our expectation was. So anything can happen with the consumer, but we're certainly starting to get that momentum that helped us feel confident in giving our guide of up single digits, low single digits this year. Some of that will be aided by -- as we talked about some of the new partners coming online and also just continued improvement in credit quality. And those things together should manifest itself into some loan growth.

Yes. So maybe just talking about purchase volume, just, we had the winter storm. Did you guys see any effect from that? Any -- give us a month-to-date, quarter-to-date update, if you can, on purchase volume at least?

So it wasn't an overly big impact. So January was starting out really well. What also happens, our people bring a pull forward spend. Everybody knew this big storm was happening. They went to the grocery stores, they had to get provisions. They went out their Home Depot or whatever they had to go to, get stuff. So I think it actually pulled forward some spend. And then yes, when you might have had a little lower spend in a few days of the storm, and then they resume. So it wasn't a material impact from what we saw. I mean it certainly in some retailers, people were not out at some stores. But -- so then coming into February, we're still continuing to see solid trends.

And then just wanted to dig in a little bit on T&E spend. That was particularly strong in 4Q. I guess two questions on that. One, you guys know what drove that for you all? And then just how is that trend holding up here in 1Q? And like do you expect that to continue to stay strong?

So as our portfolio mix has continued to shift, right, as Ralph just talked about the offerings that we have out there, a little more co-brand, we're starting to see some of that seasonal pattern, which you'll see some summer months, we get a little more T&E. And obviously, November, December are big T&E months. I think in our portfolio, you're starting to see that, particularly some of our specific T&E-type brand partners. But also when you have more co-brand, top of [ Ulta, ] you can pick up more of that spend. So I'd expect that to more -- have a little more seasonal activity throughout the year.

No that makes sense. And then on the 2026 outlook, we don't need to go through every number, like you just laid it out. I think people kind of understand it. But just talk maybe like really big picture, when you sit back, like these are a couple of areas where there's real opportunity. This is the area where there's some -- maybe some risk, and we really got to execute, a couple of things have to fall our way. Kind of like as you think about the guide, where is the opportunities and risks?

Look, when we give a guide, to be candid, we're trying to make sure we've incorporated all known risks, all known opportunities that we're executing against. So we hold our teams accountable to execute that. But when we look at it, we want to make sure we're giving something that we look at you and the investors and that we can get something that's credible that we have a chance to make sure we meet or beat. On the loan side, I think clearly, there's a lot of unknowns in there in terms of what can happen from a macro standpoint, and we can even use tax refunds as an easy example. Well, if more consumers pay down debt, I mean payment rates will be higher, which means loans come in lower, or do they spend more, which means loans are a little higher, which could be great, then you have the delinquency and loss factors. So overall, I'd tell you that the guide on revenue, we feel very confident in that with -- in line with loans. And if things shift to the good, obviously, we would signal that. Loans, we just need to execute on the new partner launches, the ones we've recently launched and make sure they deliver. And the health of the consumer, we feel pretty good with that. We talked about that one. On losses, based on January coming in kind of as expected, that sets up well. Again, the tax refund coming in higher and lower with those, we did not overplan that into our guide. So just because it's too much of an unknown of how the refund will get used, we model a little bit more traditional refund behaviors. So that's one that could improve it. I don't think the refund activity would be a headwind to us achieving our loss rate. If anything, it will be a tailwind to out be on the low end of that.

Maybe on -- just staying on tax refunds, and I know we -- who knows how it plays out? Obviously, most people are expecting larger refunds, you get that. But what happened like with stimulus? Like what does the Bread consumer typically do? Like is it more spend it, save it, pay down debt? What does the Bread consumer typically do with these windfall games, if you will?

Yes. So again, we talked about the K economy, where we aren't over concentrated more in the middle. It's -- it varies based on income and risk score. So you almost create a matrix. And depending on where you are in there, if you have -- if you already have a decent amount of savings, likely part is you're going to save that refund, or you've been saving up for a big trip, or it's not too dissimilar to what you saw with stimulus or go out and buy some luxury brand thing that you really shouldn't have been buying, but you did for your income cohort. But you do see all the different -- you really do see a variety of that. For people who are a little more stretched, a family of four, they may pay down debt and be responsible with that. So we do see truly a variety of that a mixture. And I don't -- I'm not saying it was 1/3, 1/3, 1/3 because you can't tie it perfectly, but it's something like that.

Okay. Got it. Maybe let's talk about credit a little bit more. Credit has been trending nicely for a few quarters now. I guess just two questions that arise that we get a lot from investors really. As credit continues to trend better, the comps do get tougher this year like because you improved last year. So should we expect the year-over-year improvements to continue at the rate they have been? Do you think there'll be a slowdown? I mean your guide implies a little bit less improvement if you take the midpoint, right? What's driving that? And then the other question is just you're at 5.5% -- like you've guided to 5.5%, 6% long-term guidance. You're at 7% plus. You seem somewhat comfortable there. So just how do you react to both those?

Yes. I apologize if I've given anybody the impression that I'm comfortable at 7% because if you were inside the walls of our company, we have lots of conversations with the team. We need to do better, and that there's a clear expectation to get around 6%. 5.5%, I'm not sure I've given that number recently, but we'll say around 6% is where we're comfortable because of the way we underwrite. We underwrite for profit and returns. And so that's what -- while we're, I'll say, accepting of a 7% and not trying to force it down faster by taking credit actions that would then hurt returns. So because of the way we underwrite, and the way we price, we could have taken an action in '23, '24, '25 and choked off credit a bit more, put on much smaller new vintages that drove for instead of, say, a 6% target for that new vintage, a 4% target. And we could have then gotten our loss rate down faster in total. However, that would have been damaging to our brand partners because they would have had less credit sales, it would have been damaging to our investors because these new vintages we're putting on have very healthy returns. So we would be chopping off some very strong returning segments within that new vintage. So that's why I think when you're saying. Comfortable means we're not taking, what I'll say, more honing actions to drive it down faster. The year-over-year comps, exactly what you said, are just coming in a little slower, at least on our guide, that's where we are. I mean we'll be hopeful that we can beat that, but it's still a lot of year to go before we're going to be comfortable saying that. But everything is tracking and trending well towards that glide path to get back to close to 6%.

Got it. I want to dig in a little bit maybe on the first part of that about just partners and like what -- how the partners react when you tighten credit, and what that created? Maybe you could talk a little bit about more about that. Just how closely do you work with partners in setting the credit guidelines? How much of a say do they have in terms of where you set them, and when you can tighten, when you don't? And how do you think about that equation? And what does that actually mean long term?

Yes. Our focus of our partners is responsible growth, right? They want responsible growth, we want responsible growth. And they're pushing for us to underwrite. But agreements we have -- and we kind of honor the agreements we have, but it's about being responsible, giving people the opportunity to spend within their means because the partners don't want these people to go bad either because it's a reflection of them, it's a reflection of us. So the partners are pretty reasonable. We work with them continuously about how we can offer credit, where we can offer credit. The first thing we have in mind is we're a bank, safety and soundness of the bank is key, right? And that's what we focus on. And to the extent that we can extend credit, and again, Perry is right, we extend credit for profitability. Is there profitability in what we do, and how we do it. So the partners get that. And we have a team that's really focused on making sure that they understand why we grant credit or sometimes why we don't grant credit, and how we can work together to get better data and smarter data from there -- from them that makes us comfortable to go ahead and grant that credit. But it's an ongoing conversation. It's not -- it's continuous. It's not ad hoc.

Got it. And then just staying with credit, like in terms -- I wanted to ask about the reserve rate. Is it fair for me to be -- to assume that I guess there will be quarterly variability might be transactors and all that stuff, I think people understand. But in general, the reserve rate from where you are should be gradually trending down as loss rates improve. But the real question is, where should we think about that ending up long term? How do you think of it like a lot of other companies, people look at day 1 CECL, probably not fair to look at that for you all, given it was a completely different management team, different profile of the business. What's the right long-term reserve rate for Bread?

Long term, based on the portfolio construct that we have, and where we think we're going, and the loss rate gliding down to 6% and going with, I'll say, more of a neutral economy outlook, I would say you're around that 10% range is where that would be. Now if our portfolio is constructed very differently, and you had a 5% loss rate, I might give you a different answer. But that's not what I think the path for our company is. And so you should expect, as you have seen, it's going to be more so credit-quality driven and macro outlook inputs. Those two things combined are what will glide that number down. The -- in fact, you've seen it where we've actually peaked in losses and reduced the reserve rate because delinquency came down. And that's the first input into a model, right?

Okay. No, that makes sense. On the competitive intensity dynamic partners, I guess a question that we've been getting a little bit more is like what's the current state of play? How competitive is it? We've seen some big portfolios moving. I mean, again, like probably like too large for you all to really be in that. But in general, like what is the dynamic, right? Is the path of growth for you all from here more wins, competitive wins? Is it more just de novo programs that you have to build? How are we thinking about that? What does pipeline look like?

The pipeline continues to be robust. And I think one of the things for us that I really enjoy about this business is we can compete up and down that chain of partners. So we can do the de novos, which we really like because there's no upfront capital outlay. You build as you go, and we like that. And if you look at a $100 million portfolio, you put 10 of those together, that's $1 billion and not a lot of customization and a good rate, and you're building your reserves as you go. So there's good returns on those. And you build a partner. Ulta is a clear example of that. That started -- went from 0 to 60, it's one of our biggest partners. So we can do that. But we can also compete at that $0.5 billion to $1 billion level, where we have the expertise, and the capital now to go after those, the ones that make sense to us. So we like those as well. And renewals are always a -- as we think about renewals, those are always good places to go. So if you think about new de novo partners, deeper penetration in your renewal -- in your existing base and that purchase of the one-off portfolio and moving that forward. It's a combination of all three. There's competition in the marketplace. I think some of our traditional competitors are probably moving on. If you think about some of the big ones, now they have other fish to fry in terms of acquisitions and other things. So there could be opportunities there for us as well. And then you've got some new fintech entrants. Sure we can have those fintech entrants come in with the hottest technology. And we like that because that hot technology keeps us on our toes, but hot technology without expertise is just hot technology. So we like the combination of that hot technology and the expertise. And we win on price, but we win also on how to manage partners because that's our business. We're in the partnership business, and we manage the partner holistically, not just a piece of the partner, and that's the important part.

When we think about verticals, one of the things that we've heard from companies like yours, and this is getting credit, one of the things that surprised me a little bit maybe this quarter was like they talked about their right to win in certain verticals that they just are best-in-class. So they usually win in that vertical, and they are up. Is there -- are there certain verticals where Bread is just a little bit -- you feel like we're really on the front foot here. This is our right to win. We're going to -- if we're competing here, we're going to win certain verticals or categories?

We have a really good expertise in beauty. I mean if you think about our partners in beauty, we have really good expertise there, and that's been a really good vertical for us. Jewelry has always been a good cornerstone for as we move forward. But we've been growing verticals quite frankly, if you think -- we were talking about technology and if you think about technology, we talked about Dell, HP, B&H Photo, those are really good digital and technology verticals. I'm pleased to see we won last year a Crypto.com, which is really kind of prove to the marketplace that we have our digital shops in place. So that's an area we'd like to focus on. Is there a digital vertical for us as we move forward. But we feel we can compete in any of those verticals. We have a sports vertical. If you think about the NFL, the Yankees and others [indiscernible]. For us, it's -- we have good expertise up and down the line. The furniture vertical now has really been expanded, home improvement. even on Bread Pay, we've just expanded into two telecom and home security with Cricket. Cricket now is a partner of ours as is Vivint, which is home security. So we're across the board. And I think the key for us is we can offer multiple products to all those verticals as we kind of talked about earlier, what -- the right product for the right consumer, wherever they are in that -- their lending maturity, we can offer a product.

Maybe we'll turn to funding for a couple of minutes. You refinanced some debt last year, I think you went from a pretty significant step down in the coupon there. You also did a preferred share issuance. So as we think about 2026, what are the funding targets that you're solving towards, working towards?

Yes. So we did make a lot of progress in 2025. To your point, we started the year at $900 million of senior notes at 9.75%, and we refinanced it and paid it down to $500 million of 6.75%. We issued $400 million of subordinated notes, which helped our risk-based capital as well as entered into the preferred stock arena with our first offering at $75 million. So as you look into this year, again, one of the things we really focused on last year is continue to build our direct-to-consumer deposits. We exited the year around $8.5 billion. Expect to continue to grow that this year and continue to increase that as a source of our funding, continue to increase that, hopefully achieving the target that Ralph set out there of getting to 50% of our total funding. We'll ring the bell in 2026, we'll see. And then really, we're pretty stable on the senior notes, not looking for any activity there. We will perhaps reduce the amount of sub debt in the market if it was the right time to do that and then enter some more preferred stock throughout the year, again, opportunistically when the market conditions permit.

Got it. Actually, just going back real quick, I thought of this one on. I think most of your partners are locked through 2028 in terms of renewal risk or partner risk, that's correct, right? So there's nothing -- no renewal, nothing...

For top 10.

Top 10. Got it. And then just wanted to go back to pricing a little bit. There's been -- you've been getting a benefit from the pricing changes that were implemented. I guess, what is the tail? Like how should we think about NIM this year. Is that going to continue to contribute to NIM? You have moving parts where potentially get some rate cuts? So how are you thinking about NIM for the year?

Yes. So when we gave some initial views or guidance on NIM for the year, it contemplated a couple of rate cuts in the year. It contemplated continued improvement in gross losses. So that's a benefit to reversal of interest and fees. It also contemplated improvement in delinquency, which means fewer build late fees in our yield. It contemplated continued credit risk mix from the different products and product diversification that we're putting in. And to your point, and all those things put together, would have probably had us guiding NIM slightly down. But due to the pricing changes that are still working their way through because it takes time for all the APR increases to churn through the portfolio due to the Card Act payment allocation rules, that's what guided us to flat to slightly up. It is a bit of a tailwind into this.

And correct me if I'm wrong, but higher tax refunds, if it's used to pay down that debt, might actually be a good guy for NIM because it burns through the...

That is true.

Okay. Got it. Maybe just -- Perry -- maybe Ralph and Perry, both of you can answer this, you both have been there a few years now. Like I guess what is the biggest -- when you sit back and look at it, like what is the area; one, like opportunity that you should be tackling that maybe has not been tackled as well as you would have expected? Or you feel there's more work to do to go after?

There's -- it's a good question. I am really proud of where we are, but we're not done yet, right? I think to me, it's responsible, repeatable, good growth, right? I think that's where -- that's the next horizon for us, just really good growth year after year, being responsible with that and managing the expenses to support that growth. Now we've launched operational excellence, and we've had really very good results where we are self-funding our investments. That's where we want to be. We promise positive operating leverage, right? So -- but that to me is that repeatable, good growth year after year. And that's at the right returns. That's where we want to be.

And I'll add on to that. I concur with everything Ralph just said. And I think where we still have work to do, we're in the middle innings is tech transformation. That's been -- tech is hard, and it's been a big lift to move our production platform off to Fiserv, and now we're in the middle of migrating things to cloud. And then the fun part is all the emerging technology that's coming into play is helping to accelerate that. So we have a great Chief Technology Officer team, that is doing a terrific job and reevaluating road maps on a pretty frequent basis because what you thought was the right road map a year ago or even six months ago gets a refresh because of new capabilities. So I think that's one of our greatest opportunities ahead of us.

And the road map is GPS, changes so quickly.

So on that topic, actually, the tech and the changes, AI, obviously, everyone has an AI strategy.

Yes.

What's...

Well, we have to say agentic three times a day, or we can't exist. I think like everything else we've done and everything else we'll do, we're taking a thoughtful sound approach to it. So the first thing we did was, okay, what's the right governance around AI? Because we have partner data, and we have customer data, and that's sacrosanct to us. And how do we protect that? And what do we have to -- what are we going to let into our environment. And I think that's the right approach. And so we have a good governance around it. Secondly is what challenges and use cases do we have that AI can solve for us. We are not going to chase the shiny object. We're going to look and say, okay, here are our challenges. How does this really new technology help us solve these challenges. And third, Perry's team does a great job on this, what's -- are we getting the right return on the investment for the investments we're making in AI. And so I think that's -- we approach it no different than we approach any kind of other investment, and it's changing, and it's dynamic. And we're looking at a lot of things, like everybody else, we set up a lab, so we could look at what's out there, and we don't want to be -- understand and experiment a little bit. But that's our approach. And it will evolve. And right now, for us, we view AI as something that enhances our associates' ability to service customers, enhances our ability to underwrite. It enhances our ability to prevent fraud. So it does a lot of good things for us, and it will evolve. And listen, it helps in terms of production and employees and all those types of things. But really, it enhances everything we do. It makes us smarter and better each day, and we seek the returns for that. So -- and we've been using it for years. We're using machine learning and all those things for a number of years. So it's a continuation of that. But -- and we're investing smartly. And we invest what we think is appropriate for us, and we get those appropriate returns.

One thing on AI that we -- from investors sometimes is, "Hey, if the world moves to agentic commerce and bots are buying things. What's the role of the private label card, the store card?" Like I guess, how are your retail partners talk? What are you all talking to your retail partners about this? Are you all doing things to make sure that something is happening on agentic, it's still going to be on the store card as the default card. Does it become easier or harder?

So in some ways, it becomes little bit easy, right? Because listen, we always want to be in a purchase path, right? That's where you want to be as a card issuer. We will be in that purchase. So if agentic is going to say, here are the things -- here's a suggestion. And by the way, here's how you should finance your suggestion. That's where we want to be. And we're working with partners to work through those types of things. So I think that's it. At the end of the day, you have to underwrite people, you have to give them the right line, you have to service them and sometimes you have to collect from them. So it's that whole process. And -- but it starts with, is this the right product for me, giving the consumer the choice. And here's how we would be there in the purchase path to say, here's the best financing for you and the best -- and that's the best financing for the partner, best financing for the customer, and you'll those marry those -- marry that together.

Yes. And I'll add on to what Ralph said. We were just with some partners this past weekend as well as our client partnership team. And they said, if they're not speaking daily and using the word agentic as Ralph jokes it three times a day because they want to make sure that their product is the one selected when the agent is out shopping, and then, they want to make sure that they are able to have repeat buyers, engagement, it all comes back to the fundamental business model that we have is loyalty that they have a good loyalty program that offers that customer the best value, inclusive of whether it's the points, the rewards and the financing opportunity, and where they'll have a chance of being underwritten more deeply like we do. So it's the same partnership. So we're in lockstep with our brand partners to take advantage of this opportunity in front of us.

So we have about 2, 3 minutes left. If there's any questions, happy to, anyone? I don't see any. So maybe we can just end with this for each both of you, just what is the 1 or 2 initiatives that you're really excited about working on in 2026 at Bread?

Well, aside from both our daughters are getting married in 2026, that's the issue we're both working on. Not to each other, but they're getting married. To me, it's, what we mentioned before, good responsible growth, managing our expense base, managing credit and servicing that consumer. I think that's what we're going to focus on. It sounds awfully boring. We'll continue to invest in technology and digital and AI. We'll continue to do those things. And again, to be able to have the capital to do all three, invest in the business, keep our balance sheet strong and return capital to shareholders is a good place to be, and that's going to be our focus. But that responsible growth at a positive operating leverage is our focus.

I've been resisting now, but like you really trained them well on this responsible growth thing, which you learned, I'm sure, in your time here, but because it's very familiar for all the Bank of America people. But anyway, Perry?

It's hard to add on to that. He covered the whole thing, but it's exactly that, right? It's basic blocking and tackling. Now there's nothing big we have to fix. So now we can run the company and really be opportunistic to deploy capital in the best way we can. So it's an exciting time in front of us. I think we really hit that inflection in third and fourth quarter of this past year, and we're excited for this 2026.

Great. Thank you. Thanks, everyone.

Thank you.