Back to top

Image: Shutterstock

Ally Financial (ALLY) Wraps Up POS Financing Business Sale

Read MoreHide Full Article

Ally Financial Inc. (ALLY - Free Report) has completed the divestiture of its point-of-sale (POS) financing business – Ally Lending (that includes $2.2 billion of loan receivables as of Dec 31, 2023) – to Synchrony (SYF - Free Report) . The move reflects ALLY's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.

The deal was announced in January. At that time, ALLY expected the divestiture to bolster its Common Equity Tier 1 (CET1) ratio by almost 15 basis points (bps) at closing. Further, the deal is projected to be modestly accretive to tangible book value and earnings per share (EPS) this year.

Under the terms of the transaction, Ally Financial’s relationships with almost 2,500 merchant locations and support to more than 450,000 active borrowers in home improvement services and healthcare will get transferred to SYF. It anticipates the deal to be accretive to its 2024 EPS, “excluding the impact of the initial reserve build for credit losses at acquisition.”

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, in January, 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 has been undertaking steps to bolster profitability amid a challenging operating backdrop. In 2023, the company trimmed its headcount, leading to $80 million of annualized expense savings. Further, the deconsolidation of $1.7 billion worth of seasoned retail auto loans resulted in 9 bps of CET1 benefit.

The divestiture of Ally Financial's POS financing business aligns with its strategic business transformation effort, 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 aiding profitability.

Shares of this Zacks Rank #3 (Hold) company have jumped 24.8% in the past three months, outperforming the industry’s growth of 19.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

Zacks Investment Research
Image Source: Zacks Investment Research

Last month, Truist Financial (TFC - Free Report) entered an agreement to sell the remaining 80% stake in its insurance subsidiary — Truist Insurance Holdings (“TIH”) — to Stone Point Capital and Clayton Dubilier & Rice. Mubadala Investment Company and co-investors are also participating in the investment. In April 2023, the company had divested 20% stake in TIH.

Following the deal closure (expected in the second quarter of 2024), TFC’s CET1 capital ratio is expected to increase by 230 basis points, and its tangible book value per share will rise by $7.12 or 33%. The transaction is projected to be dilutive to Truist Financial’s 2024 earnings by 20 cents per share, assuming that the proceeds from the sale were reinvested in cash yielding 4.5%.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Ally Financial Inc. (ALLY) - free report >>

Synchrony Financial (SYF) - free report >>

Truist Financial Corporation (TFC) - free report >>

Published in