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Ally Financial’s (ALLY - Free Report) first-quarter 2022 adjusted earnings of $2.03 per share surpassed the Zacks Consensus Estimate of $1.93. The bottom line reflects a decline of 2.9% from the year-ago quarter.
Results benefited primarily from an improvement in revenues, and higher loans and deposit balances. However, a rise in expenses, as well as higher provisions, hurt results to some extent. This could have been a reason behind the company’s stock losing 5% following the earnings release.
After considering non-recurring items, net income (on a GAAP basis) was $627 million or $1.86 per share, down from $796 million or $2.11 per share in the prior-year quarter.
Revenues Improve, Expenses Rise
Total GAAP net revenues were $2.14 billion, up 10.2% year over year. The top line met the Zacks Consensus Estimate.
Net financing revenues were up 23.4% from the prior-year quarter to $1.69 billion. The rise was driven by an increase in interest and fees on finance receivables and loans, total interest, and dividends on investment securities and operating leases.
The adjusted net interest margin was 3.95%, up 77 basis points year over year.
Total other revenues were $442 million, down 21.8% from the prior-year quarter.
Total non-interest expenses were up 19% year over year to $1.12 billion. The upswing stemmed from higher compensation and benefits expenses, and other operating expenses.
The adjusted efficiency ratio was 45.6%, up from 44.4% in the year-ago period. A rise in efficiency ratio indicates deterioration in profitability.
Credit Quality: A Mixed Bag
Non-performing loans of $1.39 billion as of Mar 31, 2022, were down 3.5% year over year.
However, in the reported quarter, the company recorded net charge-offs of $133 million, up 12.7% from the prior-year quarter. Also, it reported provision for loan losses of $167 million against provision benefits of $13 million recorded in the prior-year quarter.
Loans & Deposit Balances Rise
As of Mar 31, 2022, total net finance receivables and loans amounted to $122.1 billion, up 2.6% from the prior quarter. Also, deposits increased marginally from the prior-quarter end to $142.5 billion.
Capital Ratios Deteriorate
As of Mar 31, 2022, the total capital ratio was 13.1%, down from 14.6% in the prior-year quarter. Tier I capital ratio was 11.5%, down from 12.8% as of Mar 31, 2021.
Share Repurchase Update
In first-quarter 2022, the company repurchased $584 million worth of shares.
Our View
Ally Financial’s initiatives to diversify its revenue base will likely keep aiding its profitability. Given a solid balance sheet, the company remains well-poised to expand through acquisitions. However, persistently rising expenses (mainly due to the company’s inorganic growth efforts) and higher provisions will likely hurt bottom-line growth.
Ally Financial Inc. Price, Consensus and EPS Surprise
Lower markets revenues, reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) first-quarter 2022 earnings of $2.63 per share, which missed the Zacks Consensus Estimate of $2.73. The reported quarter’s results included net credit reserve build and losses in Credit Adjustments & Other.
JPM’s equity markets revenues and fixed-income markets revenues fell 7% and 1%, respectively, on a year-over-year basis. Equity and debt underwriting fees tanked 78% and 20%, respectively. Then again, advisory fees were a saving grace, rising 18%.
Citigroup Inc.’s (C - Free Report) first-quarter 2022 earnings per share of $2.02 handily outpaced the Zacks Consensus Estimate of $1.74. However, the reported figure declined 44% from the prior-year quarter.
Starting first-quarter 2022, Citigroup removed its Global Consumer Banking segment. The new reporting structure differentiates four core businesses. In the reported quarter, Citigroup’s Treasury and Trade Solutions revenues improved, while Investment Banking revenues declined. A rise in deposit balances was a positive.
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Ally Financial (ALLY) Stock Dips Despite Q1 Earnings Beat
Ally Financial’s (ALLY - Free Report) first-quarter 2022 adjusted earnings of $2.03 per share surpassed the Zacks Consensus Estimate of $1.93. The bottom line reflects a decline of 2.9% from the year-ago quarter.
Results benefited primarily from an improvement in revenues, and higher loans and deposit balances. However, a rise in expenses, as well as higher provisions, hurt results to some extent. This could have been a reason behind the company’s stock losing 5% following the earnings release.
After considering non-recurring items, net income (on a GAAP basis) was $627 million or $1.86 per share, down from $796 million or $2.11 per share in the prior-year quarter.
Revenues Improve, Expenses Rise
Total GAAP net revenues were $2.14 billion, up 10.2% year over year. The top line met the Zacks Consensus Estimate.
Net financing revenues were up 23.4% from the prior-year quarter to $1.69 billion. The rise was driven by an increase in interest and fees on finance receivables and loans, total interest, and dividends on investment securities and operating leases.
The adjusted net interest margin was 3.95%, up 77 basis points year over year.
Total other revenues were $442 million, down 21.8% from the prior-year quarter.
Total non-interest expenses were up 19% year over year to $1.12 billion. The upswing stemmed from higher compensation and benefits expenses, and other operating expenses.
The adjusted efficiency ratio was 45.6%, up from 44.4% in the year-ago period. A rise in efficiency ratio indicates deterioration in profitability.
Credit Quality: A Mixed Bag
Non-performing loans of $1.39 billion as of Mar 31, 2022, were down 3.5% year over year.
However, in the reported quarter, the company recorded net charge-offs of $133 million, up 12.7% from the prior-year quarter. Also, it reported provision for loan losses of $167 million against provision benefits of $13 million recorded in the prior-year quarter.
Loans & Deposit Balances Rise
As of Mar 31, 2022, total net finance receivables and loans amounted to $122.1 billion, up 2.6% from the prior quarter. Also, deposits increased marginally from the prior-quarter end to $142.5 billion.
Capital Ratios Deteriorate
As of Mar 31, 2022, the total capital ratio was 13.1%, down from 14.6% in the prior-year quarter. Tier I capital ratio was 11.5%, down from 12.8% as of Mar 31, 2021.
Share Repurchase Update
In first-quarter 2022, the company repurchased $584 million worth of shares.
Our View
Ally Financial’s initiatives to diversify its revenue base will likely keep aiding its profitability. Given a solid balance sheet, the company remains well-poised to expand through acquisitions. However, persistently rising expenses (mainly due to the company’s inorganic growth efforts) and higher provisions will likely hurt bottom-line growth.
Ally Financial Inc. Price, Consensus and EPS Surprise
Ally Financial Inc. price-consensus-eps-surprise-chart | Ally Financial Inc. Quote
Currently, Ally Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Large Banks
Lower markets revenues, reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) first-quarter 2022 earnings of $2.63 per share, which missed the Zacks Consensus Estimate of $2.73. The reported quarter’s results included net credit reserve build and losses in Credit Adjustments & Other.
JPM’s equity markets revenues and fixed-income markets revenues fell 7% and 1%, respectively, on a year-over-year basis. Equity and debt underwriting fees tanked 78% and 20%, respectively. Then again, advisory fees were a saving grace, rising 18%.
Citigroup Inc.’s (C - Free Report) first-quarter 2022 earnings per share of $2.02 handily outpaced the Zacks Consensus Estimate of $1.74. However, the reported figure declined 44% from the prior-year quarter.
Starting first-quarter 2022, Citigroup removed its Global Consumer Banking segment. The new reporting structure differentiates four core businesses. In the reported quarter, Citigroup’s Treasury and Trade Solutions revenues improved, while Investment Banking revenues declined. A rise in deposit balances was a positive.