Ally Financial's (ALLY) Stock Up 1.8% On Q4 Earnings Beat
Zacks Investment Research | Jan 30, 2018 09:57PM ET
Shares of Ally Financial Inc. (NYSE:ALLY) increased 1.8% following the release of its fourth-quarter and full-year 2017 results. Adjusted earnings of 70 cents per share for the quarter surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line compared favorably with the prior-year quarter figure of 54 cents.
Results benefited from an increase in total net revenues, partially offset by higher expenses. Also, capital ratios improved on a year-over-year basis in the quarter. However, higher provision for loan losses was a headwind.
After taking into consideration non-recurring items, including the 27 cents per share charge related to the Tax Act, net income available to common shareholders (GAAP basis) for the quarter was $181 million or 41 cents per share, decreasing from $248 million or 52 cents registered in the prior-year quarter.
For 2017, adjusted earnings per share came in at $2.39, surpassing the Zacks Consensus Estimate of $2.30 per share. Also, the figure improved 10.6% year over year. Net income available to common shareholders (GAAP basis) was $929 million or $2.04 per share compared with $1.04 billion or $2.15 per share in 2016.
Revenues Improve, Expenses Rise
Total net revenues for the quarter increased nearly 7.7% year over year to $1.47 billion, owing to a rise in net financing revenue. Also, the figure surpassed the Zacks Consensus Estimate of $1.44 billion.
For 2017, net revenues were $5.77 billion, increasing 6% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $5.75 billion.
Total non-interest expenses for the quarter increased 6.7% year over year to $769 million. The rise was due to an increase in compensation and benefits expense, and other operating expenses.
Credit Quality: Mixed Bag
Non-performing loans of $792 million at the end of the quarter were down 3.3% year over year. However, provision for loan losses increased 10.1% year over year to $294 million.
Strong Balance Sheet, Capital Ratios Improve
Total finance receivables and loans amounted to $121.62 billion as of Dec 31, 2017 compared with $117.59 billion as of Sep 30, 2017. Deposits totalled $93.26 billion, increasing from $90.12 billion as of Sep 30, 2017.
As of Dec 31, 2017, total capital ratio came in at 12.9%, increasing from 12.6% registered in the prior-year quarter. Similarly, Tier I capital ratio was 11.2%, up from 10.9% as of Dec 31, 2016.
Share Repurchases
During the year, the company repurchased shares worth $753 million.
Our Take
Ally Financial’s initiatives toward diversifying revenue base are likely to support profitability in the quarters ahead. Also, the company's steady capital deployment plan reflects a strong balance sheet position. Moreover, given the gradual change in the rate environment, its margin is expected to further improve, thereby supporting top-line growth. However, high debt levels and mounting expenses remain major concerns.
Ally Financial Inc. Price, Consensus and EPS Surprise
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