Ally Financial’s (ALLY - Free Report) first-quarter 2021 adjusted earnings of $2.09 per share convincingly surpassed the Zacks Consensus Estimate of $1.18. Also, the bottom line showed a significant rebound from a loss of 44 cents incurred a year ago.
Results benefited from growth in revenues and provision benefits, partly offset by higher expenses and lower loan balance. Further, a strong deposit balance and improving capital ratios were tailwinds.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $796 million or $2.11 per share against net loss of $319 million or 85 cents in the prior-year quarter.
Revenues Improve, Expenses Rise
Total net revenues for the reported quarter were $1.94 billion, up 37.2% year over year. The figure also outpaced the Zacks Consensus Estimate of $1.76 billion.
Net financing revenues were up 19.7% from the prior-year figure to $1.37 billion. This rise was driven by lower funding costs, higher retail auto revenues and better gains on off-lease vehicles. These were partially offset by higher mortgage premium amortization, and lower commercial auto portfolio balance and yield.
Adjusted net interest margin was 3.18%, up 50 basis points (bps) year over year.
Total other revenues of $565 million improved significantly from $266 million recorded in the prior-year quarter.
Total non-interest expenses were up 2.5% to $943 million. The upswing stemmed from a rise in compensation and benefits expense.
Adjusted efficiency ratio at the end of the first quarter was 44.4%, down from 52.3% in the year-ago period. A decline in efficiency ratio indicates improvement in profitability.
Credit Quality: Mixed Bag
Non-performing loans of $1.44 billion as of Mar 31, 2021 were up 3.1% year over year. However, net charge-off rate was 0.41%, down 43 bps.
Provision for loan losses was a benefit of $13 million against a provision of $903 million in the prior year quarter.
Loans Down, Deposits Up
Total net finance receivables and loans amounted to $109.9 billion as of Mar 31, 2021 decreasing 4.6% from the fourth-quarter 2020 level. However, deposits totaled $139.6 billion, up 1.9%.
Capital Ratios Improve
As of Mar 31, 2021, total capital ratio was 14.6%, up from 12.8% in the prior-year quarter. Tier I capital ratio was 12.8%, up from 10.9% as of Mar 31, 2020.
Share Repurchase Update
During the quarter, the company repurchased shares worth $219 million.
Our View
Ally Financial’s initiatives to diversify its revenue base and its rise in deposit balance will aid its profitability. However, persistently mounting expenses and near-zero interest rates are concerns.
Currently, Ally Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings Release Date of Other Consumer Loan Providers
SLM Corporation (SLM - Free Report) is slated to announce quarterly numbers on April 22 while both Capital One (COF - Free Report) and Navient Corporation (NAVI - Free Report) ) will report on April 27.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
AccessZacks Top 10 Stocks for 2021 today >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Ally Financial’s (ALLY - Free Report) first-quarter 2021 adjusted earnings of $2.09 per share convincingly surpassed the Zacks Consensus Estimate of $1.18. Also, the bottom line showed a significant rebound from a loss of 44 cents incurred a year ago.
Results benefited from growth in revenues and provision benefits, partly offset by higher expenses and lower loan balance. Further, a strong deposit balance and improving capital ratios were tailwinds.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $796 million or $2.11 per share against net loss of $319 million or 85 cents in the prior-year quarter.
Revenues Improve, Expenses Rise
Total net revenues for the reported quarter were $1.94 billion, up 37.2% year over year. The figure also outpaced the Zacks Consensus Estimate of $1.76 billion.
Net financing revenues were up 19.7% from the prior-year figure to $1.37 billion. This rise was driven by lower funding costs, higher retail auto revenues and better gains on off-lease vehicles. These were partially offset by higher mortgage premium amortization, and lower commercial auto portfolio balance and yield.
Adjusted net interest margin was 3.18%, up 50 basis points (bps) year over year.
Total other revenues of $565 million improved significantly from $266 million recorded in the prior-year quarter.
Total non-interest expenses were up 2.5% to $943 million. The upswing stemmed from a rise in compensation and benefits expense.
Adjusted efficiency ratio at the end of the first quarter was 44.4%, down from 52.3% in the year-ago period. A decline in efficiency ratio indicates improvement in profitability.
Credit Quality: Mixed Bag
Non-performing loans of $1.44 billion as of Mar 31, 2021 were up 3.1% year over year. However, net charge-off rate was 0.41%, down 43 bps.
Provision for loan losses was a benefit of $13 million against a provision of $903 million in the prior year quarter.
Loans Down, Deposits Up
Total net finance receivables and loans amounted to $109.9 billion as of Mar 31, 2021 decreasing 4.6% from the fourth-quarter 2020 level. However, deposits totaled $139.6 billion, up 1.9%.
Capital Ratios Improve
As of Mar 31, 2021, total capital ratio was 14.6%, up from 12.8% in the prior-year quarter. Tier I capital ratio was 12.8%, up from 10.9% as of Mar 31, 2020.
Share Repurchase Update
During the quarter, the company repurchased shares worth $219 million.
Our View
Ally Financial’s initiatives to diversify its revenue base and its rise in deposit balance will aid its profitability. However, persistently mounting expenses and near-zero interest rates are concerns.
Currently, Ally Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings Release Date of Other Consumer Loan Providers
SLM Corporation (SLM - Free Report) is slated to announce quarterly numbers on April 22 while both Capital One (COF - Free Report) and Navient Corporation (NAVI - Free Report) ) will report on April 27.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
AccessZacks Top 10 Stocks for 2021 today >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on SLM - FREE
Get the latest research report on COF - FREE
Get the latest research report on ALLY - FREE
Get the latest research report on NAVI - FREE