Ally Financial (ALLY) Q4 Earnings Beat Estimates, Stock Up

Shares of Ally Financial Inc. (NYSE:ALLY) gained 5.7% following the release of the company’s fourth-quarter 2018 results. Adjusted earnings of 92 cents per share surpassed the Zacks Consensus Estimate of 82 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 70 cents.

Ally Financial’s fourth-quarter results witnessed improvement in loan and deposit balances, and decrease in provisions. However, lower revenues, higher noninterest expenses and lower capital ratios affected the results.

After taking into consideration non-recurring items, net income available to common shareholders (GAAP basis) for the reported quarter was $290 million, increasing from $181 million registered in the prior-year quarter.

Adjusted earnings per share for 2018 came in at $3.34per share, which outpaced the Zacks Consensus Estimate of $3.25. Further, the figure compares favorably with earnings of $2.39 per share reported in 2017. Net income available for common shareholders (GAAP Basis) for 2018 amounted to $1.3 billion, up from $929 million witnessed in the previous year.

Revenues Down, Expenses Rise

Total net revenues for the reported quarter were $1.44 billion, down 2.4% year over year. Further, the figure lagged the Zacks Consensus Estimate of $1.52 billion.

Total net revenues for 2018 were $5.80 billion, up nearly 1% year over year. However, the figure missed the Zacks Consensus Estimate of $5.86 billion.

Total non-interest expenses for the quarter increased 4.6% year over year to $804 million. The rise was due to an increase in rep and warrant expense.

Credit Quality: Mixed Bag

Non-performing loans of $107.4 million at the end of the reported quarter were up 35.6% year over year. However, provision for loan losses decreased 9.5% year over year to $266 million.

Strong Balance Sheet, Capital Ratios Decline

Total net finance receivables and loans amounted to $128.7 billion as of Dec 31, 2018, compared with $125.4 billion as of Sep 30, 2018. Deposits totaled $106.2 billion, increasing from $101.4 billion as of Sep 30, 2018.

As of Dec 31, 2018, total capital ratio was 12.3%, decreasing from 12.9% registered in the prior-year quarter end. Similarly, Tier I capital ratio was 10.8%, down from 11.2% as of Dec 31, 2017.

Share Repurchases

During the reported quarter, the company repurchased shares worth $309 million.

Our Take

Ally Financial’s initiatives toward diversifying revenue base are likely to support profitability in the quarters ahead. However, persistently increasing expenses and use of high debt levels remain major near-term concerns.

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 Other Banks

Washington Federal’s (NASDAQ:WAFD) first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s (NYSE:SNV) fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure surged 27.8% compared with the prior-year tally.

Hancock Whitney Corporation’s (NASDAQ:HWC) fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. However, the reported figure came in 30.2% higher than the year-ago tally.

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