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Ally Financial (ALLY) to Sell POS Financing Business to Synchrony
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Ally Financial Inc. (ALLY - Free Report) announced a definitive agreement to sell Ally Lending (its point-of-sale or POS financing business), including $2.2 billion of loan receivables, to Synchrony (SYF - Free Report) . This move reflects Ally Financial's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.
The portfolio being acquired by SYF is a strategic fit, reinforcing its position in the industry by offering both revolving credit and installment loans at the point-of-sale in the home improvement vertical. Brian Doubles, president and CEO, highlighted the significance of the deal, stating, "This accretive acquisition enhances Synchrony’s position by offering our multi-product portfolio to nearly 2,500 Ally Lending merchant locations, and enables us to achieve attractive economies of scale while further diversifying our merchant base."
For Ally Financial, this transaction is part of a broader initiative to invest resources in growing scale businesses and strengthen relationships with dealer customers and consumers. Jeff Brown, CEO, noted, "This transaction allows us to continue to be disciplined in allocating capital to optimize risk-adjusted returns as we manage through a dynamic operating environment."
ALLY expects the divestiture to bolster its Common Equity Tier 1 (CET1) ratio by almost 15 basis points (bps) at closing. The deal is also anticipated to be modestly accretive to tangible book value and earnings per share (EPS) in 2024.
On the other hand, Synchrony anticipates the acquisition to be accretive to full-year 2024 EPS, showcasing its commitment to creating value for shareholders.
Both companies are committed to ensuring a smooth transition for merchants, customers, and employees. The transaction is expected to close in the ongoing quarter, subject to customary closing conditions.
Concurrently, ALLY released its fourth quarter and full-year 2023 results. Adjusted quarterly EPS of 45 cents beat the Zacks Consensus Estimate by a penny. The company also provided upbeat 2024 guidance. This year, net interest margin is expected to be in the range of 3.25-3.3%, up from 3.17% in 2023. Also, other revenues are projected to increase 5-10%.
Driven by these developments, shares of Ally Financial gained 10.7% on the last trading day.
Further, the company has been undertaking steps to bolster profitability amid a challenging operating environment. Last year, Ally Financial lowered its headcount, leading to $80 million of annualized expense savings. Also, the deconsolidation of $1.7 billion worth of seasoned retail auto loans resulted in 9 bps of CET1 benefit.
Besides, Ally Financial's decision to divest its POS financing business aligns with its strategic vision, allowing it to focus on core growth areas. This, along with a decent rise in consumer loan demand and efforts to diversify the revenue base, is likely to keep supporting profitability.
Shares of this Zacks Rank #3 (Hold) company have surged 52.7% in the past three months, outperforming the industry’s growth of 30.5%.
Image Source: Zacks Investment Research
One consumer loan stock worth mentioning is Navient (NAVI - Free Report) . The company is scheduled to announce fourth quarter and full-year 2023 results on Jan 31. The stock sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NAVI’s 2023 earnings estimates have remained unchanged at $3.49 over the past week. This reflects year-over-year growth of 9.4%.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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Ally Financial (ALLY) to Sell POS Financing Business to Synchrony
Ally Financial Inc. (ALLY - Free Report) announced a definitive agreement to sell Ally Lending (its point-of-sale or POS financing business), including $2.2 billion of loan receivables, to Synchrony (SYF - Free Report) . This move reflects Ally Financial's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.
The portfolio being acquired by SYF is a strategic fit, reinforcing its position in the industry by offering both revolving credit and installment loans at the point-of-sale in the home improvement vertical. Brian Doubles, president and CEO, highlighted the significance of the deal, stating, "This accretive acquisition enhances Synchrony’s position by offering our multi-product portfolio to nearly 2,500 Ally Lending merchant locations, and enables us to achieve attractive economies of scale while further diversifying our merchant base."
For Ally Financial, this transaction is part of a broader initiative to invest resources in growing scale businesses and strengthen relationships with dealer customers and consumers. Jeff Brown, CEO, noted, "This transaction allows us to continue to be disciplined in allocating capital to optimize risk-adjusted returns as we manage through a dynamic operating environment."
ALLY expects the divestiture to bolster its Common Equity Tier 1 (CET1) ratio by almost 15 basis points (bps) at closing. The deal is also anticipated to be modestly accretive to tangible book value and earnings per share (EPS) in 2024.
On the other hand, Synchrony anticipates the acquisition to be accretive to full-year 2024 EPS, showcasing its commitment to creating value for shareholders.
Both companies are committed to ensuring a smooth transition for merchants, customers, and employees. The transaction is expected to close in the ongoing quarter, subject to customary closing conditions.
Concurrently, ALLY released its fourth quarter and full-year 2023 results. Adjusted quarterly EPS of 45 cents beat the Zacks Consensus Estimate by a penny. The company also provided upbeat 2024 guidance. This year, net interest margin is expected to be in the range of 3.25-3.3%, up from 3.17% in 2023. Also, other revenues are projected to increase 5-10%.
Driven by these developments, shares of Ally Financial gained 10.7% on the last trading day.
Further, the company has been undertaking steps to bolster profitability amid a challenging operating environment. Last year, Ally Financial lowered its headcount, leading to $80 million of annualized expense savings. Also, the deconsolidation of $1.7 billion worth of seasoned retail auto loans resulted in 9 bps of CET1 benefit.
Besides, Ally Financial's decision to divest its POS financing business aligns with its strategic vision, allowing it to focus on core growth areas. This, along with a decent rise in consumer loan demand and efforts to diversify the revenue base, is likely to keep supporting profitability.
Shares of this Zacks Rank #3 (Hold) company have surged 52.7% in the past three months, outperforming the industry’s growth of 30.5%.
Image Source: Zacks Investment Research
One consumer loan stock worth mentioning is Navient (NAVI - Free Report) . The company is scheduled to announce fourth quarter and full-year 2023 results on Jan 31. The stock sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NAVI’s 2023 earnings estimates have remained unchanged at $3.49 over the past week. This reflects year-over-year growth of 9.4%.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.