Welcome everyone, and thank you for joining this afternoon. My name is Terry Ma. I'm the consumer finance analyst at Barclays. I'm very pleased to have Bread Financial with us today. From the company, we have Ralph Andretta, the President and CEO. We have Perry Beberman, the Chief Financial Officer, and we have Valerie Greer, the Chief Commercial Officer. So the format of this will be a short presentation by Bread, and then we are going to go to a fireside chat format. So I'll just turn it over to Ralph.
Terry, thank you, and thank you all for coming to the closing act today in this room. I appreciate it very much. I'm with, as Terry said, Perry Beberman, our CFO, and Valerie Greer, our Chief Commercial Officer. We have some prepared remarks, and then we're happy to take questions during the fireside chat. I'd like to start on slide three. Regarding the U.S. economy, we're closely monitoring the impact of persistent inflation, rising interest rates, and the expiration of student loan forbearance, and the impact it has on our consumer spending as macroeconomic uncertainties continue. The current economic headwinds tend to disproportionately impact moderate to low-income consumers and have led to a moderation of overall consumer spending.
With the addition of the spikes in gas prices, it also hurts our spending. However, in certain categories like beauty and travel and entertainment, we continue to see year-over-year spending growth. In other categories, like specialty apparel, spending is on a decline. Given the current economic uncertainties, we continue to proactively and responsibly tighten our underwriting and credit line management. We manage our exposure by limiting approval rates, pausing line increases, and decreasing lines where prudent. We'll continue to adjust to changing economic macroeconomic conditions as appropriate. All of these factors will continue to slow credit sales and loan growth in the back half of the year. If you move to slide four.
When I joined the company in 2020, I committed to simplifying the business model, advancing technological capabilities, and fortifying our balance sheet by reducing leverage and improving our capital position. We have made significant progress in all of these areas, providing a solid foundation for sustainable, profitable growth. This slide highlights several of our large transformation actions we have implemented over the past three years to build a stronger, more focused financial services company. We started with the addition of consumer finance industry veterans across all areas of our organization, including our board of directors. In particular, John Gerspach, the former CFO of Citigroup, was elected to the board in 2020 and currently leads our audit committee. Joyce St. Clair recently joined our board, bringing 30 years of industry and risk oversight experience.
We also strengthened our executive management team with Perry Beberman and, Val Greer, our commercial officer, both of whom have extensive credit card lending and financial services experiences. Across our executive team, we have leaders who have successfully navigated through numerous economic cycles and industry changes. Each of us joined Bread because we saw the opportunity to build a disciplined, high-quality financial services company with long-term focus. Through responsible risk management and prudent capital management, we aim to drive sustainable, profitable growth that builds long-term shareholder value.
Back in 2020, we primarily offered a single product private label credit card. Since then, we have enhanced our lending offerings to provide product diversification across our $18 billion of total credit card portfolio. With over 100 brand partner relationships and our direct-to-consumer offerings, our addressable market is expansive and covers a full range of consumer demographics. We continue to grow with long-term strategic partners such as Ulta and Signet, and have added iconic brands like AAA and most recently, Dell Technologies.
Dell is anticipated to launch in the fourth quarter of this year. With the renewal of Signet in the first quarter of 2023, we now have our five largest partners under contract through at least 2028. Nearly 85% of the loans in our current portfolio are with partners who are under contract through at least the end of 2025, providing stability to our business. Our direct-to-consumer deposits have experienced significant growth since inception in 2019 and now exceeds $6 billion. The success of our direct-to-consumer deposit platform has been essential in enabling our growth and diversifying our funding.
We have made significant investments to upgrade our core technology and digital capabilities, supporting our lending and payment products. We have added a digital product platform, upgraded our core processing services, built out our enhanced digital suite for our partners, and most recently, developed our own self-service app. These enhancements have enabled us to renew existing brand partners, secure new partners, and gain operational efficiencies. We continue to proactively manage our credit risk to protect our balance sheet in the face of challenging economic conditions. Through our focus on proactive, conservative credit risk management, we have improved our credit risk distribution. Close to 60% of our cardholders have over 660 or higher Vantage Score, and that was at the end of the second quarter, which was well above pre-pandemic levels.
Finally, we have strengthened our balance sheet by reducing debt and building capital while maintaining a conservative loan loss reserve. We tripled our TCE to TA ratio over the last three years to 9.4%. We reduced our leverage by $1.7 billion during the same period, including paying down parent unsecured debt by more than $500 million last quarter. In doing so, we have enhanced shareholder value, increasing our tangible book value by a compound annual growth rate of 33% since 2020. If you move to slide five, our current areas of focus for 2023 are growing responsibly, continuing to strengthen our balance sheet, optimizing data and technology, and strategically investing in our business. As we pursue sustainable, profitable growth that builds long-term shareholder value, we will moderate growth below our long-term targets when economic conditions present challenges for our customers.
We continue to selectively pursue new partnership opportunities that will be accretive to our business, both de novo programs and partners with existing portfolios. Additional strengthening of our balance sheet remains integral to our long-term strategy. Supported by our strong free cash flow, our balance sheet management actions further enhance our financial resilience and provide additional flexibility. We will continue to build our capital position, refine and improve our funding structure, and proactively manage our credit, liquidity, and interest rate risk. Data and analytics, technology upgrades have enhanced our growth and improved our efficiency.
We continue to leverage innovative capabilities gained from our platform conversions, system enhancements, and extended product portfolio. We are investing in a range of technology innovations, from data and customer analytics to self-service and digital capabilities, as we continually strive to deliver exceptional value and experiences for our cardholders. Our goal is to continuously generate efficiencies, to reinvest in our business, to support responsible growth and achieve our targeted returns. I'll turn it over now to Val Greer, our Chief Commercial Officer, to discuss the importance of our product and partner diversification. Thank you.
Thank you, Ralph. Slide six represents how our unique business model drives customer loyalty and sales growth through our broad set of product offerings. The expansion of Bread's financial product offerings enables us to meet a wide variety of needs from our customers, resulting in higher conversion and product adoption rates. As a result, our brand partners can better manage their product mix and optimize their profitability. We offer one of the widest payment product suites in the market, serving the entire generational segment. If we offered only one product, which some of our competitors do, we would miss up to 40% of our customers' preferred payment methods. Consumers want the option to spread their purchases across different payment methods, often based on the size of the basket or their preference for rewards.
By having access to a rich product mix, consumers can grow with a partner brand and progress into more mature product offerings over time and based on behaviors and needs. The graduation strategy deepens customer engagement with the brand and benefits merchants over the long term. For example, our analytic team can pull new cohorts of shoppers, identify purchase patterns, and enable targeted acquisition tactics on both our co-brand and private label products. In addition, we offer personalized, intelligent, and optimized messaging solutions that help convert and grow shoppers with our brand partners.
These capabilities have enabled Bread to put a card product in the wallets of one in eight American adults. Slide seven highlights the growing diversification of our product mix, which is essential to managing a large credit card portfolio. This diversification better optimizes our risk-adjusted returns to help deliver sustainable, profitable growth. You can see the growing balance between our private label and co-brand spend, with co-brand now comprising approximately 50% of credit sales. By expanding our co-brand portfolio, we can capture incremental sales as consumer spending patterns shift in response to evolving economic conditions.
Many of our partners, like Ulta, Sephora, Victoria's Secret, offer both private label and co-brand financing options for their customers. This optimizes customers' ability to earn rewards and enhances their lifetime value by graduating from a private label card to a co-brand card when appropriate. To further diversify product mix, we introduced our proprietary card in 2020. Benefits of this product include no partner risk and no sharing of economics. Bread Pay rounds out our lending product suite by offering buy now, pay later options, including both SplitP ay and installment lending, products that are desirable by millennials and Gen Zs.
With our full product suite, we've increased our total addressable market and captured incremental spend. This full product suite and supporting capabilities allow us to offer the right product to the right customer when most relevant. Our comprehensive product suite not only provides graduation and optimization strategies that increase the lifetime value of a customer for us and our brand partner, but also helps to balance portfolio risk. In addition to our product diversification, slide 8 illustrates our vertical diversification. We continue to expand our newer verticals and strengthen our share in growing verticals like health and beauty, travel, and entertainment. For example, we signed and converted the $1.5 billion AAA co-brand portfolio in the fourth quarter of 2022, and have grown our proprietary card offerings to 5% of our total loans.
As a result of our diversified growth, our specialty retail vertical is only a quarter of overall sales, down from over 50% just a few years ago. We bring value to our partners in several ways, including relevant product and experiences, reward and loyalty, technology, data, and analytics. We have a long history of working closely with the brands we serve and are focused on building relationships where we increase value for both parties. We are dedicated to providing solutions that drive loyalty, whether through credit reward programs, promotional financing, or payment flexibility that is branded and part of the shopping experience. Our product and partner diversification is especially relevant considering the pending CFPB late fee proposal.
Having moved well beyond offering private label credit cards and specialty retail to a much more diversified vertical and product and consumer mix, we are now better positioned to mitigate the financial impacts of the proposal. We are having productive conversations with our brands regarding those mitigation strategies in preparation for a final ruling. While each program has different potential impacts, we are focused on optimizing outcomes for our company as well as for our brand partners. I will now turn it over to our CFO, Perry Beberman.
Thanks, Val. So moving to slide nine. Looking at our credit performance, our early-stage delinquency rates are trending as expected, with gradual pressure on the consumer due to persistent inflation and rising interest rates. As we noted, July represented the last month that our credit metrics were impacted by the transition of our credit card processing services. Going forward, our metrics will be more aligned with typical seasonal trends, macroeconomic factors, and loan growth. As Ralph mentioned, we are seeing slowing sales growth as a result of both moderating consumer spending and our targeted credit tightening, which is slowing loan growth. While credit tightening should benefit net loss dollars in 2024, it will pressure our net loss rate due to reduced loan growth in the next few quarters.
Based on our performance quarter to date, we are confident of achieving a loss rate at our guided 7% level for third quarter of this year. Looking ahead to the fourth quarter, we see losses dependent on three key elements. First, there is the typical seasonal uplift in the net loss rate of approximately 50 basis points from the third quarter to the fourth quarter. Second, we continue to see the additional impact of over two years of persistent inflation, pressuring consumers in both spend and their ability to recover from mid to late-stage delinquency. Lastly, given the macro environment, we will continue to take prudent credit actions with an eye towards our long-term results, which may pressure loan growth, as mentioned, and therefore add additional pressure in the fourth quarter loss rate equation.
Our percentage of cardholders with a 660+ credit score remains materially above pre-pandemic levels, given our prudent credit tightening actions and a more diversified product mix, with co-brand and proprietary cards representing a larger portion of our portfolio. Slide 10 is one of my favorite slides to review, as it highlights Bread Financial's strong, durable profit margins. Even at the elevated loss rates last seen in the Great Financial Crisis, our risk-adjusted PPNR profit margin would remain positive, given the strength of our peer-leading risk-adjusted loan margins. Given the same economic conditions today, we would expect to outperform those historical loss levels due to the transformational improvements we have made, including our improved credit risk score distribution and enhanced underwriting discipline.
Now, as Ralph mentioned, we proactively manage our portfolio, continuously updating risk management models and underwriting criteria consistent with our Recession Readiness Playbook for both new and existing accounts. We primarily focus on managing open-to-buy authorizations, which help consumers better manage their credit lines and balances. We closely monitor our projected returns with the goal of generating strong risk-adjusted margins above our peers. We believe that our disciplined risk management and improved risk profile, coupled with our more diverse portfolio and brand partner base, will enable us to manage even more successfully through the full economic cycle.
Moving to slide 11. While we've made substantial progress to strengthen our balance sheet since 2020, additional opportunities remain. Specifically, we aim to build our total company capital levels closer to those of our peers, while reducing our double leverage ratio from where we are today. We will balance achieving these targets with continued investments in our business and responsible growth aligned with our capital priorities. Our actions over the past three years provide the company with greater financial flexibility to support our long-term strategy.
Wrapping up, we have meaningfully increased our tangible book value per common share since the fourth quarter of 2020, and given our strong cash flow generation, we expect to further grow our tangible book value over time. We believe that this growth, combined with our improved financial resilience and a strengthened balance sheet, should yield a market valuation that is a multiple of tangible book value. We remain confident in our strategic direction, and we will continue to build long-term value for our shareholders. Now I'll pass it over to Terry for Q&A.
Great. Thanks, Perry. So you guys touched on this a little bit. You updated the third quarter a bit. Can you maybe just provide some more color on where sales trends have been going, maybe across the different platforms and categories as well?
Sure. So, you know, as we think about it, as we've said, you know, there has been that continued inflationary pressure that includes food and grocery and rent. So we have seen some, you know, pullback from some of our customer base. Where we do see continued strong engagement is in categories like beauty and health, which although many people might view that as discretionary, consumers very much behave like it's nondiscretionary, so we see good sales there. We also continue to see very good sales in our travel and entertainment portfolio. So consumers continue to lean in on experiences and travel versus hard goods, and so we see some good lift there on the consumer side as well.
Okay, that's helpful. And then you guys updated your receivables growth guidance last quarter to low to mid single digits. So how's that been tracking? Any incremental color there?
Yeah. Loans are tracking a little lower, right, per the revised guidance, and that's a combination of consumers pulling back on their spend. So think about it as, we'll call top-of-the-funnel application flow has slowed some for new accounts, and then the credit tightening that I mentioned is then also reducing the number of those applications that convert into new accounts to make sure we're staying within our risk tolerance and framework. And then existing customers are making trade-offs for discretionary versus nondiscretionary spend and self-moderating and pulling back some spend as well. So that's what's contributing to a little bit lower loan growth as we've guided.
Got it. That, that's helpful. Can you maybe just comment on the overall health of the consumer based on the trends that you're seeing?
Yeah, I think what you're observing is, you know, across the entire credit spectrum. We've been talking about this for over a year. The consumer has been really resilient through this, and navigating the economy as best they can. When you think about the K Economy, and for us, in particular, a full-spectrum lender, we will underwrite, you know, moderate and even some lower-income folks. So you think about Middle America and that lower middle income, the bottom part of a K-e conomy, they've been depleting their savings. Inflation has hit them the hardest.
Now, you have rising interest rates, and, you know, inflation hasn't come down as quickly as, you know, I think we'd like to see it to benefit them. We're starting to finally see a little bit of wage growth outpacing inflation, so that's a good sign. I think things are starting to show some signs of improvement for them. But, you know, they're, they're navigating through this. So I think as you look at credit quality, we're starting to see some stabilization as we expected. We're still above our 6% through-the-cycle loss rate.
So when you think about through-the-cycle, you're going to have periods of time where you're above it, and then you're going to have periods of time where we should be below it, so you can average out to what you're, you're expecting. Right now, I think you're seeing when you look at, you know, what we've guided for this quarter, around 7%, that's the part of that that's above that 6% through the cycle target is due to the economic stress that the consumers are feeling.
Got it. That's helpful. So just on the theme of credit, you guys guided to a mid-7% in the charge-off rate for 2023. Sounds like you're tracking in line with that. Is that correct? And then on the through-the-cycle loss rate of six, can you maybe just talk about how you get there and over what time frame?
Yeah. So for the 7% is for the third quarter, right? So you think about the first quarter, it was influenced by about 40 basis points from the conversion to our new processing platform. And then the second quarter was impacted by 100 basis points. So this quarter really had just a little bit in July, but largely we'll call it a clean quarter, so the 7% for the quarter is really where it's at. And then you think about, in my prepared remarks, I talked about this a little bit. Seasonally, fourth quarter is higher, so if we're at 7% for the third quarter, typically fourth quarter is 50 basis points higher.
I expect the fourth quarter to increase more than the 50 basis points due to the fact we're pulling back on the denominator. Plus, you're still seeing a little bit of a weakness in, you know, probably some late-stage delinquency that may pull through. So, you know, again, it's very fluid in terms of watch of the consumer, but we're very active with our credit underwriting to, you know, to help the consumer navigate this.
Got it. And then on the 6% through the cycle loss rate, how do you get back down there and over what time frame?
Yeah. So you think about a typical cycle, it can vary between, I'll call it, nine to 15 years, call it 10 years on average. So the way to think about through the cycle, it's usually peak to peak or trough to trough, and the average is of that whole cycle. So in the-- in here, we have this year, we're above the 6% target. I would expect next year to be above, and then you're going to have a period of time when you're going to be below the 6% target, so you then average out to 6%. So right now we're in a more economic, I'm not going to say severe stress, but we're, you know, the consumer that we serve is a little more stressed right now.
So it's just going to be the natural. You know, cycles, and that's why they call it economic cycles. You know, there's periods above, and you're gonna have these periods that we're below. But the way you avoid the high peak is by prudent underwriting. That's where we talked earlier, is the, the things we've put in place over the past few years under Ralph's leadership, is more prudent risk models, credit underwriting. And we work very carefully and collectively across the firm, in Val's organization, the credit organization, finance, to make sure that we really have a good line of sight in what responsible work looks like, and that we can deliver that through the cycle 6%. And a lot of it comes from product mix, credit mix, and good underwriting.
Great. That's helpful color. So maybe just turning to the reserve ratio, it was 12.3% last quarter, I think. You mentioned it may have peaked based on the macro outlook then. Maybe just provide some updated commentary on that.
Yeah, I'm feeling, I'd say, more confident in that the reserve rate has hopefully peaked around this 12.3%. And a combination of, I don't expect material movements in the economic outlooks, meaning that I expect to see some period of time where, okay, losses across the industry could rise into next year. I mean, you hear someone was talking about maybe peaking in 2025. I think they'll peak somewhere next year for the consumers we serve, and then it should start to, you start to see the improvement. But as the dynamics of the reserve rate, what is your expected credit losses over the life of these loans than carrying for possible downside economic scenarios? I think as the baseline models, you know, increase the loss rate expectation, as more delinquency comes through, the losses rise.
You can pull back on those risk overlays if things are playing out as you expect. And if the outlook really improves, you could actually see a scenario where the reserve rate can come down a little bit, even as you're peaking out your loss rate, because the outlook is now an improved outlook. Because, you know, when the actual losses happen, that's a rearview event. It's now about the future. So I think we're in a good spot for this. I think you're gonna see a little bit of seasonal movement in the reserve rate. So fourth quarter often could tick down, but then it usually pops back up in the first quarter.
Yeah. The only thing I'll say about reserve rate is I credit Perry with really being focused on getting us through the uncertainties with the right reserve rate. You may recall, first couple of quarters in the last year, our reserve rate was, you know, questioned by the industry in terms of was it too high. But now we're very comfortable with that. We can absorb losses through this uncertainty.
I think it's very quick. Got it. So what about longer term? It's about the reserve rate, that is, is about 300 basis points higher than CECL day one. Many other issuers have talked about converging onto that number or their specific number over time. Is that a fair guessing for you?
You know, there's a lot of moving parts that go into the, the CECL reserve rate. One, first and foremost, it's gonna be the credit quality of the book that we have, you know, two years out, right? Or three years out, whenever it is you think we might converge. So what's the risk mix of the book? What's the product mix? If there's a continued shift in, product mix to more co-brand or something that delivers a through the cycle loss rate below 6%, you could expect to be, you know, at or below that day one, all else being equal. Then I think the day one that's produced by different companies, you all have different, risk overlays in there.
I would tell you that unless there's a really blue-sky scenario where there's almost no risk on the horizon, I think it's tough to get back to a, you know, today's book to that day one number, because most of the risk overlays is to care for some downside scenario. So I think we're going to come down markedly from where we are today. I don't know if we get all the way to day one, but I think it's really dependent on the credit risk mix.
Got it. All right. That's helpful. Is there any color you can provide on the impact of student loan forbearance ending? Any color you can give on a portion of your portfolio that's impacted by that and just any potential credit outcomes from that?
Yeah. So we have a little less than a quarter of our book has a student loan. You know, we know that at the time of consumer, when we underwrote them, who has that? So that feeds into all of the active and proactive risk management actions that we take around looking at the lines, line increases, line decreases, who you underwrite. And so we're going to monitor very carefully how these consumers perform as the expected repayments, you know, resume. So we've got them up on ring fence to watch, but we do not believe it's going to have a material impact for us. And then the other thing that we're watching is the administration's action. They've already signaled they're going to be pretty proactive.
They didn't like the fact they didn't get to, you know, waive a bunch of these payments or, rather, forgive. So they're going to do things where, you know, the discretionary income calculation, that then there's a percentage that the consumer would be obligated to put towards student debt. It sounds like they're going to change the discretionary income calculation and then reduce the minimum required amounts of repaid debt from 10% to 5%. So that'll further benefit these consumers. And then if you're somebody who makes minimum wage, it might be zero dollar they have to repay. So there's a number of other things that will aid consumers, particularly in that moderate income range, that, you know, could mitigate some of the what could be expected impacts.
Okay, got it. So I wanted to switch gears and talk about regulatory action or change and the capping of late fees. Maybe just give us updated thoughts on that. You know, is there any way to quantify or help investors frame the amount of revenue that's exposed?
Yeah, so I'll start. It wouldn't be a Fireside Chat without talking about late fees and I, I'm sure our comments will be consistent with everybody that's presents that question. So we're waiting for the final announcement in, you know, October. My guess is it probably won't change much from what the CFPB originally signaled that will happen. I expect that there'll be litigation. You know, we've lined up with the industry as all of other financial services have, and we've got our plans in place. You know, we weren't waiting for the CFPB announcement. We've been working this, you know, prior to the announcement. And, you know, the plans fall in four specific areas. You know, no secret there'll be, you know, APR increases as we think about it through the cycle.
There'll be a cost for credit like there are in other countries in terms of applying for a credit. Will there be a cost for credit? We'll work with our partners to get to a point where it's profitable—you know, we can still underwrite, and it can be profitable for them and profitable for us. That'll be the third kind of leg of the stool. The fourth leg of the stool will be we just won't underwrite certain segments that we underwrite today. There's a short-term benefit of that from a capital perspective and a CECL perspective, but you know, that's an unintended consequence of capping late fees, where that economic, those economics no longer are viable.
We're not privy to that economics, and, you know, we'll have to just draw a line in terms of who we can underwrite and how we can underwrite them. But we're focused on it, like everything else we've done over the last three and a half years, and you see that here. Our capital metrics are better, our debt levels are lower, our shareholder value is higher. We'll focus on this in terms of execution and close the gap over the appropriate period of time.
Yeah. And you asked about the, you know, financial impact. Right now, it's about the late fees are in our net interest margin, or our interest fee line item. You know, you would expect at the time of implementation, meaning when you are legally required to have the effect go into place, it, we don't think it'll be before mid-next year, just due to the time it takes for the, I'll say, the processors to affect this across all the banks they serve. That's at earliest, and that's after a stay and everything else. You know, there's going to be a period of time where there's a little bit of a lag burn-in for the APR changes. You should expect, as Ralph mentioned, APRs to go up across the board.
And then, whereas things like for fees that could be almost immediate, new accounts, pricing, immediate. So there's going to be a burn-in over the next two to three years, just to be fully mitigated through the actions that Ralph spoke about. If you think about the impacts to us, it really depends on... And Val will talk through the product set that we have. Each product set has a different degree of impact. So, hard goods, less impacted, co-brands, less impacted, whereas the private label soft goods are more impacted. And maybe, Val, you can give some, you know, color in terms of how that looks across, you know, the different dimensions of each of those types of products and partners.
Yeah, and, and thanks, Perry. So when you think about just the average balance across those, you know, you've got a small ticket, small balance around the soft goods private label, which is why the late fee is more impactful there, versus your bigger ticket on the promotional side and your co-brand. So our mitigants that Ralph talked about are very specific to those three different types of products and our partners, and they're each weighing them a little bit differently.
In some cases, some folks are very sensitive around their value propositions, and so that's going to be a core part of what we're going to be focused on as we are mitigating through on either the APR or the underwriting, or the new product that we've talked about in terms of do you add a promotional fee to access promotional financing? It's a product that we had here, in the US before. It's in Canada today, it's in Australia. And so we will be mitigating in different ways across those product sets.
Yeah, and the last thing I'll say, if you think about our portfolio from the end of 2019 to where we're at today, it's evolved. So, we were primarily private label, as, you know, as we enter 2020. If you look at it now, co-brand, direct to consumer, the buy now, pay later, installment loan, all of those skew towards less reliance on late fees. And we'll continue to pivot the business as we move forward, but, you know, make no mistake, it's going to, it's going to create a gap, and our job is to close that gap thoughtfully and as quickly as we can.
Great. So I just want to round out the regulatory discussion with capital allocation and, you know, impact from Basel and maybe just talk about that.
Sure. I mean, you know, we're less than a $1 billion asset company, so, the B3 Endgame applies to firms with over $100 billion in assets, so it should not be applicable to us. In fact, you know, when Val, Ralph, and I talk about it, we think it could actually be a strategic opportunity for us because a lot of our big competitors are going to have to hold a higher degree of capital for different opportunities that are presented.
So as we're competing for deals or evaluating, you know, new product opportunities, you know, our capital ratios won't be as impacted for that, those types of changes. You know, we'll monitor it. We're not going to, we're not going to lean in harder than what we do. We're going to stay very disciplined to our responsible growth and make sure we're getting the right return on our capital. But again, it's for the capital that we're expected to hold, not for what they're expected to hold.
Got it. All right, so I'm going to pause right here and go to the two audience response questions. Can you guys queue those, queue those up? Question one is: Where would you like Bread's focus to be regarding capital in the medium term? One, growth, two, paying down debt, three, buybacks, or four, other.
Do we get to vote or just the audience?
The audience.
I know what Tom's voting.
Paying down debt.
There you go.
You guys have any comments on that?
Thank you. And I'm glad you recognize that over the last three years, and we've talked about, we've paid down $1.7 billion of our debt as a parent. We've been able to dividend up to the parent from the banks $500 million in the second quarter. Our focus is to continue to pay down that debt and reduce our double leverage. And that's a use of our capital. Other use of our capital being to prudently grow this business and continue to invest, obviously, and then we certainly would love to turn, you know, to return value to shareholders over the right period of time.
Okay.
I'd like to know what's in the other category, but good it is.
Okay, great. So last question, please. Over the next year, would you expect your position in Bread to, one, increase, two, decrease, or three, stay the same? Okay, so-
Well. 53% stay the same, and then about equally split between increase, decrease. So I'm very pleased with these results. I think, you know, October is gonna have a lot to do with the future in terms of what the... where the CFPB comes out and what the implications of that are. But I, you know, I'm very confident that our, you know, our, our plans and the execution of our plans have been over the last three years, will mitigate that in, in, in due time.
Okay, great. We have a couple of minutes. I'll just open it up to Q&A, if there is any questions. All right, then I guess we'll just wrap up. Thank you.
Thank you all for your time.
Yeah.
Appreciate it. Thanks, everyone.