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

Shares of Ally Financial Inc. ALLY gained 6.8%, following the release of its fourth-quarter and 2019 results. Quarterly adjusted earnings of 95 cents per share were in line with the Zacks Consensus Estimate. The figure reflects an increase of 3.3% from the year-ago quarter.

Results were driven by an improvement in revenues and growth in deposit balances. Also, capital ratios were impressive. However, higher non-interest expenses along with rise in provision for loan losses acted as headwinds.

After taking into consideration non-recurring items; net income available to common shareholders (GAAP basis) was $378 million or 99 cents per share compared with $290 million or 70 cents per share recorded in the prior-year quarter.

For 2019, adjusted earnings were $3.72 per share, which lagged the Zacks Consensus Estimate of $3.74. The bottom line was 11.4% higher than the year-ago figure. Net income available to common shareholders (GAAP basis) for the year was $1.72 billion or $4.34 per share, increasing from $1.26 billion or $2.95 per share recorded in 2018.

Revenues Improve, Expenses Rise

Total quarterly net revenues were $1.64 billion, up 14.3% year over year. The figure was in line with the Zacks Consensus Estimate.

For 2019, total net revenues were $6.39 billion, up 10.2% year over year. Further, the figure surpassed the Zacks Consensus Estimate of $6.35 billion.

Total quarterly non-interest expenses increased 9.5% year over year to $880 million. The upside stemmed from an increase in all components of expenses.

Credit Quality: Mixed Bag

Non-performing loans of $1.01 billion as of Dec 31, 2019, were down 7.3% from the prior-year quarter end.

However, provision for loan losses increased 3.8% year over year to $276 million.

Balance Sheet Strong, Capital Ratios Improve

Total net finance receivables and loans amounted to $126.97 billion as of Dec 31, 2019, decreasing marginally from the previous quarter. Deposits totaled $120.75 billion, increasing 1.3% sequentially.

As of Dec 31, 2019, total capital ratio was 12.8%, improving from 12.3% from the prior-year quarter end. Tier I capital ratio was 11.2% as of Dec 31, 2019, up from 10.8% as of Dec 31, 2018.

Share Repurchases

During the quarter, the company repurchased shares worth $299 million.

Our Take

Steady growth in revenues and deposits along with decent loan demand will likely continue to support Ally Financial’s profitability. Its efforts to diversify revenues and the acquisition of Health Credit Services will likely aid the company. Further, steady capital-deployment actions reflect strong balance sheet position. Nevertheless, persistently rising expenses and provisions (as witnessed during the quarter) might hurt profitability.

Ally Financial Inc. Price, Consensus and EPS Surprise

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Date of Other Companies

Washington Federal’s WAFD first-quarter fiscal 2020 (ended Dec 31) adjusted earnings were 58 cents per share, missing the Zacks Consensus Estimate of 60 cents. Results excluded the net positive impact of two significant non-recurring items.

Hancock Whitney Corporation’s HWC fourth-quarter 2019 adjusted earnings per share of $1.06 beat the Zacks Consensus Estimate of $1.04. However, the bottom line fell 5.4% from the year-ago quarter’s reported figure.

Prosperity Bancshares, Inc. PB is slated to report results on Jan 29.

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