Ally Financial’s (ALLY Quick QuoteALLY - Free Report) third-quarter 2024 adjusted earnings of 95 cents per share surpassed the Zacks Consensus Estimate of 81 cents. Also, the bottom line reflected a rise of 14.5% from the year-ago quarter.

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In the reported quarter, the company witnessed an increase in revenues and lower expenses. Also, capital ratios increased, which was a positive. However, a decline in net finance receivables and loans and deposits were the undermining factors. Also, an increase in provisions hurt results to some extent. In light of these negatives, shares of the company lost 2.3% following the earnings release.

After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $330 million compared with $269 million in the prior-year quarter.

ALLY’s Revenues Increase, Expenses Down

Total GAAP net revenues were $2.1 billion, up 6.9% from the prior year quarter. However, the top line marginally missed the Zacks Consensus Estimate of $2.12 billion.

Net financing revenues were down 2.9% from the prior-year quarter to $1.49 billion. The decline was primarily due to higher funding costs and lower average earning assets. Our estimate for net financing revenues was $1.56 billion.

The adjusted net interest margin was 3.25%, down 1 basis point year over year.

Total other revenues were $615 million, jumping 41.4% from the prior-year quarter. We projected other revenues of $517.8 million.

Total non-interest expenses decreased marginally year over year to $1.23 billion, reflecting a disciplined approach to expense management. Our estimate for expenses was $1.29 billion.

The adjusted efficiency ratio was 52.1%, stable compared to the year-ago period.

Ally Financial’s Credit Quality Deteriorates

Non-performing loans were $1.27 billion as of Sept. 30, 2024, down 15.6% year over year. Our estimate for the metric was $1.32 billion.

In the reported quarter, Ally Financial saw net charge-offs of $517 million, up 13.4% from the prior-year quarter. We had projected net charge-offs of $516 million. The company also reported a provision for loan losses of $645 million, up 27% from the prior year quarter. Our estimate for provisions was $589.2 million.

ALLY’s Loan Balances Fall, Deposits Decline Marginally

As of Sept. 30, 2024, total net finance receivables and loans amounted to $133.8 billion, down 1% from the prior quarter end. Our estimate for the metric was $136.1 billion. Deposits declined marginally from the prior-quarter end to $152 billion. We projected deposits of $151.3 billion.

Capital Ratios of Ally Financial Improve

As of Sept. 30, 2024, the total capital ratio was 12.9%, up from 12.5% in the prior-year quarter. The tier 1 capital ratio was 11.2%, up from 10.7% as of Sept. 30, 2023.

ALLY’s Share Repurchase Update

In the reported quarter, the company did not repurchase any shares.

Our View on Ally Financial

Ally Financial’s worsening credit quality amid a tough operating backdrop and mounting operating expenses are major near-term headwinds. Nonetheless, initiatives to diversify its revenue base will likely aid profitability.

Currently, Ally Financial carries a Zacks Rank #4 (Sell).
 
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Earnings Release Dates of Other Consumer Loan Providers

Capital One Financial Corporation (COF Quick QuoteCOF - Free Report) is scheduled to release quarterly numbers on Oct. 24.

The Zacks Consensus Estimate for COF’s quarterly earnings has been revised marginally upward to $3.70 per share over the past week. The estimate indicates a decline of 16.9% from the reported year-ago quarter reported figure.

SLM Corporation (SLM Quick QuoteSLM - Free Report) is scheduled to report quarterly results on Oct. 23.

Over the past week, the Zacks Consensus Estimate for SLM’s quarterly earnings has remained unchanged at 7 cents per share, implying a 36.4% year-over-year decline.