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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.
Ally Financial Inc. Price, Consensus and EPS Surprise
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.
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Ally Financial (ALLY) Q1 Earnings Beat, Revenues Improve Y/Y
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.
Ally Financial Inc. Price, Consensus and EPS Surprise
Ally Financial Inc. price-consensus-eps-surprise-chart | Ally Financial Inc. Quote
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 >>