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Ally Financial’s (ALLY - Free Report) second-quarter 2024 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of 62 cents. Also, the bottom line reflects a rise of 1% from the year-ago quarter.
In the reported quarter, the company saw a marginal increase in loans. Also, the capital ratios increased, which was a positive. However, a decline in revenues and higher expenses were the undermining factors. Also, an increase in provisions hurt the results to some extent. Probably due to these negatives, shares of the company lost 2.3% following the earnings release.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $266 million compared with $301 million in the prior-year quarter.
Revenues Decline, Expenses Rise
Total GAAP net revenues were $2 billion, down 3.8% from the prior-year quarter. Also, the top line marginally missed the Zacks Consensus Estimate of $2.02 billion.
Net financing revenues were down 5% from the prior-year quarter to $1.50 billion. The decline was primarily due to a rise in interest on deposits and interest on short-term borrowings. Our estimate for net financing revenues was $1.46 billion.
The adjusted net interest margin was 3.30%, down 11 basis points year over year.
Total other revenues were $505 million, declining marginally from the prior-year quarter. We projected other revenues of $539.9 million.
Total non-interest expenses increased 3% year over year to $1.29 billion. The upswing stemmed from higher insurance losses and loss-adjustment expenses. Our estimate for expenses was also $1.29 billion.
The adjusted efficiency ratio was 53.2%, up from 51.7% in the year-ago period. A rise in the efficiency ratio indicates a deterioration in profitability.
Credit Quality: Mixed Bag
Non-performing loans were $1.22 billion as of Jun 30, 2024, down 13.5% year over year. Our estimate for the metric was $1.47 billion.
In the reported quarter, Ally Financial saw net charge-offs of $435 million, up 9% from the prior-year quarter. We had projected net charge-offs of $500.3 million. The company also reported a provision for loan losses of $457 million, up 7% from the prior-year quarter. Our estimate for provisions was $536.8 million.
As of Jun 30, 2024, total net finance receivables and loans amounted to $135.2 billion, up marginally from the prior-quarter end. Our estimate for the metric was $135.8 billion. Deposits declined 1.9% from the prior-quarter end to $152.2 billion. We projected deposits of $152.5 billion.
Capital Ratios Improve
As of Jun 30, 2024, the total capital ratio was 12.7%, up from 12.5% in the prior-year quarter. The tier I capital ratio was 11%, up from 10.7% as of Jun 30, 2023.
Share Repurchase Update
In the reported quarter, the company did not repurchase any shares.
Our View
Ally Financial’s initiatives to diversify its revenue base will likely keep aiding profitability. Given a solid balance sheet, the company is well-poised to expand through acquisitions. The divestiture of its point-of-sale financing business — Ally Lending — to Synchrony reflects ALLY's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.
However, rising expenses (mainly due to its inorganic growth efforts) and higher provisions will likely hurt the company’s bottom-line growth in the near term.
Ally Financial Inc. Price, Consensus and EPS Surprise
Earnings Release Dates of Other Consumer Loan Providers
Capital One Financial Corporation (COF - Free Report) is scheduled to release quarterly numbers on Jul 23.
The Zacks Consensus Estimate for COF’s quarterly earnings has been revised 9% upward to $3.28 per share over the past 30 days. The estimate indicates a decline of 6.8% from the prior-year quarter reported number.
SLM Corporation (SLM - Free Report) is scheduled to report quarterly results on Jul 24.
Over the past 30 days, the Zacks Consensus Estimate for SLM’s quarterly earnings has been revised 46% upward to 73 cents per share, implying a 33.6% year-over-year decline.
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Ally Financial (ALLY) Q2 Earnings Beat, Stock Dips on Cost Hike
Ally Financial’s (ALLY - Free Report) second-quarter 2024 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of 62 cents. Also, the bottom line reflects a rise of 1% from the year-ago quarter.
In the reported quarter, the company saw a marginal increase in loans. Also, the capital ratios increased, which was a positive. However, a decline in revenues and higher expenses were the undermining factors. Also, an increase in provisions hurt the results to some extent. Probably due to these negatives, shares of the company lost 2.3% following the earnings release.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $266 million compared with $301 million in the prior-year quarter.
Revenues Decline, Expenses Rise
Total GAAP net revenues were $2 billion, down 3.8% from the prior-year quarter. Also, the top line marginally missed the Zacks Consensus Estimate of $2.02 billion.
Net financing revenues were down 5% from the prior-year quarter to $1.50 billion. The decline was primarily due to a rise in interest on deposits and interest on short-term borrowings. Our estimate for net financing revenues was $1.46 billion.
The adjusted net interest margin was 3.30%, down 11 basis points year over year.
Total other revenues were $505 million, declining marginally from the prior-year quarter. We projected other revenues of $539.9 million.
Total non-interest expenses increased 3% year over year to $1.29 billion. The upswing stemmed from higher insurance losses and loss-adjustment expenses. Our estimate for expenses was also $1.29 billion.
The adjusted efficiency ratio was 53.2%, up from 51.7% in the year-ago period. A rise in the efficiency ratio indicates a deterioration in profitability.
Credit Quality: Mixed Bag
Non-performing loans were $1.22 billion as of Jun 30, 2024, down 13.5% year over year. Our estimate for the metric was $1.47 billion.
In the reported quarter, Ally Financial saw net charge-offs of $435 million, up 9% from the prior-year quarter. We had projected net charge-offs of $500.3 million. The company also reported a provision for loan losses of $457 million, up 7% from the prior-year quarter. Our estimate for provisions was $536.8 million.
Loan Balances Increase Marginally, Deposits Decline
As of Jun 30, 2024, total net finance receivables and loans amounted to $135.2 billion, up marginally from the prior-quarter end. Our estimate for the metric was $135.8 billion. Deposits declined 1.9% from the prior-quarter end to $152.2 billion. We projected deposits of $152.5 billion.
Capital Ratios Improve
As of Jun 30, 2024, the total capital ratio was 12.7%, up from 12.5% in the prior-year quarter. The tier I capital ratio was 11%, up from 10.7% as of Jun 30, 2023.
Share Repurchase Update
In the reported quarter, the company did not repurchase any shares.
Our View
Ally Financial’s initiatives to diversify its revenue base will likely keep aiding profitability. Given a solid balance sheet, the company is well-poised to expand through acquisitions. The divestiture of its point-of-sale financing business — Ally Lending — to Synchrony reflects ALLY's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.
However, rising expenses (mainly due to its inorganic growth efforts) and higher provisions will likely hurt the company’s bottom-line growth in the near term.
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.
Earnings Release Dates of Other Consumer Loan Providers
Capital One Financial Corporation (COF - Free Report) is scheduled to release quarterly numbers on Jul 23.
The Zacks Consensus Estimate for COF’s quarterly earnings has been revised 9% upward to $3.28 per share over the past 30 days. The estimate indicates a decline of 6.8% from the prior-year quarter reported number.
SLM Corporation (SLM - Free Report) is scheduled to report quarterly results on Jul 24.
Over the past 30 days, the Zacks Consensus Estimate for SLM’s quarterly earnings has been revised 46% upward to 73 cents per share, implying a 33.6% year-over-year decline.