Ally Financials' (ALLY) Stock Declines On Q1 Earnings Lag
Zacks Investment Research | Apr 28, 2017 07:15AM ET
Shares of Ally Financial Inc. (NYSE:ALLY) declined nearly 4.2% following the company’s negative earnings surprise of 2% in the first quarter of 2017. Adjusted earnings of 48 cents per share lagged the Zacks Consensus Estimate of 49 cents. Also, the figure declined 7.7% from the prior-year quarter.
Escalated expenses and higher provisions were primarily responsible for the lower-than-expected results. Moreover, capital ratios deteriorated during the quarter. However, higher net revenues supported results to some extent.
Net income available to common shareholders (GAAP basis) was $214 million, down 8.9% from the prior-year quarter.
Revenues & Expenses Increased
Total net revenue for the quarter increased nearly 3.6% year over year to $1.38 billion, owing to a rise in total other revenue as well as net financing revenue. However, the reported figure was a shade below the Zacks Consensus Estimate of $1.39 billion.
Total non-interest expenses increased 9.6% year over year to $778 million. The rise was due to an increase in all expense components.
Credit Quality Deteriorates
Non-performing loans of $798 million were up 14.3% year over year. Moreover, provision for loan losses increased 23.2% year over year to $271 million.
Balance Sheet Strengthens, Capital Ratios Deteriorate
Total finance receivables and loans amounted to $117.85 billion as of Mar 31, 2017, compared with $117.80 billion as of Dec 31, 2016. Further, deposits totaled $84.49 billion, up from $79.02 billion as of Dec 31, 2016.
As of Mar 31, 2017, total capital ratio came in at 12.7%, down from 13.0% at the end of the prior-year quarter. Tier I capital ratio was 11.1%, compared with 11.6% as of Mar 31, 2016.
Share Repurchases
During the quarter, the company repurchased shares worth $169 million.
Our Take
We believe that Ally Financial’s efforts to diversify its revenue sources by enhancing digital offerings and introducing new products will help bottom-line growth. Further, the company’s encouraging capital deployment activities reflect a strong balance sheet position.
However, high debt levels may restrain its ability to procure additional funds for working capital, acquisitions or other purposes. This may also negatively impact the company’s access to liquidity and increase the borrowing costs in the unsecured market.
Ally Financial Inc. Price, Consensus and EPS Surprise
Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.