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Ally Financial (ALLY) Q1 Earnings Top Estimates, Costs Rise

Zacks Equity Research

Ally Financial Inc.’s ALLY first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

Results benefited from an improvement in revenues. Moreover, the quarter witnessed growth in loans and deposit balances. However, higher non-interest expenses along with rise in provisions were the major headwinds.

After taking into consideration non-recurring items, net income available to common shareholders (GAAP basis) for the reported quarter was $374 million, increasing from $250 million registered in the prior-year quarter.

Revenues Improve, Expenses Rise

Total net revenues were nearly $1.60 billion, up 13.9% year over year. Further, the figure surpassed the Zacks Consensus Estimate of $1.53 billion.

Total non-interest expenses increased 2% year over year to $830 million. The rise was mainly due to an increase in compensation and benefits expenses, and other operating expenses.

Credit Quality Worsens

Non-performing loans of $987 million at the end of the reported quarter were up 14.4% year over year. Moreover, provision for loan losses increased 8% year over year to $282 million.

Strong Balance Sheet, Capital Ratios Mixed

Total net finance receivables and loans amounted to $128.8 billion as of Mar 31, 2019, compared with $128.7 billion as of Dec 31, 2018. Deposits totaled $113.3 billion, increasing from $106.2 billion as of Dec 31, 2018.

As of Mar 31, 2019, total capital ratio was 12.5%, decreasing from 12.6% registered in the prior-year quarter end. Tier I capital ratio was 11.0%, unchanged from the Mar 31, 2018 level.

Share Repurchases

During the reported quarter, the company repurchased shares worth $211 million. Additionally, it authorized the repurchase of up to $1.25 billion shares, starting from the third quarter of 2019 through the second quarter of 2020.

Our Take

Ally Financial’s initiatives toward diversifying revenue base are likely to support profitability in the quarters ahead. Moreover, its steady capital deployment actions reflect strong balance sheet position. However, persistently increasing expenses and use of high debt levels remain major near-term concerns.

Ally Financial Inc. Price, Consensus and EPS Surprise

Ally Financial Inc. Price, Consensus and EPS Surprise | Ally Financial Inc. Quote

Currently, Ally Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Date of Other Banks

Washington Federal’s WAFD second-quarter fiscal 2019 (ended Mar 31) earnings were 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflects year-over-year growth of 10.5%.

Hancock Whitney Corporation’s HWC first-quarter 2019 operating earnings per share of $1 surpassed the Zacks Consensus Estimate of 98 cents. Further, the reported figure comes in 11.1% higher than the year-ago tally.

Synovus Financial SNV is slated to report quarterly results tomorrow.

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