Ally Financial’s ALLY first-quarter 2025 adjusted earnings of 58 cents per share handily surpassed the Zacks Consensus Estimate of 43 cents. Also, the bottom line reflected a jump of 41.5% from the year-ago quarter.

It completed the sale of Ally Credit Card on April 1, 2025. Further, the company implemented two securities repositioning transactions during the quarter to reduce accumulated other comprehensive income (AOCI) volatility and improve its interest rate risk position. These initiatives will likely solidify its balance sheet, reduce risk and aid the sustainability of returns.

Behind ALLY’s Headline Numbers

Results benefited from a rise in net finance revenues and lower provisions. However, lower other revenues, higher non-interest expenses, and a decline in net finance receivables and loans and deposits were the undermining factors.

After considering non-recurring items, net loss attributable to common shareholders (GAAP basis) was $253 million against net income attributable to common shareholders of $115 million in the prior-year quarter.

ALLY’s Revenues Dip, Expenses Increase

Total quarterly GAAP net revenues were $1.54 billion, down 22.9% from the prior-year quarter. Also, the top line missed the Zacks Consensus Estimate of $1.94 billion. Adjusted total revenues were $2.07 billion, up 3.2% from the prior-year quarter.

Net financing revenues grew marginally from the prior-year quarter to $1.49 billion. The rise was primarily driven by lower funding costs. Further, the adjusted net interest margin was 3.35%, up 16 basis points. Our estimate for net financing revenues was $1.44 billion.

Total other revenues were $63 million, down 88.1%. The decline was primarily due to other loss on investments. We projected other revenues of $504.9 million.

Total non-interest expenses increased 24.9% year over year to $1.63 billion. Our estimate for expenses was $1.20 billion. Excluding repositioning-related charges, adjusted expenses rose 1.7% to $1.32 billion.

The adjusted efficiency ratio was 56%, down from 59.8% in the year-ago period. A fall in the efficiency ratio indicates an improvement in profitability.

ALLY’s Loan & Deposit Balance Fall

As of March 31, 2025, total net finance receivables and loans amounted to $130.1 billion, down 1.7% from the prior quarter. Our estimate for the metric was $126.3 billion.

Deposits declined marginally to $151.4 billion. We projected deposits of $144.5 billion.

Ally Financial’s Credit Quality: Mixed Bag

Non-performing loans were $1.42 billion as of March 31, 2025, up 13.2% year over year. Our estimate for the metric was $1.39 billion.

In the reported quarter, Ally Financial saw net charge-offs of $507 million, down 5.9% from the prior-year quarter. We had projected net charge-offs of $564.1 million.

The company reported a provision for loan losses of $191 million, down 62.3%. The fall was attributable to the reserve release associated with the sale of Ally Credit Card and lower retail auto net charge-offs. Our estimate for provisions was $528.5 million.

Capital Ratios of Ally Financial Improve

As of March 31, 2025, the total capital ratio was 12.8%, up from 12.5% in the prior-year quarter. The tier 1 capital ratio was 11%, up from 10.8% as of March 31, 2024.

Also, the common equity tier 1 (CET1) capital ratio of 9.5% grew from 9.4% in the prior-year quarter.

Our View on Ally Financial

Ally Financial’s business restructuring initiatives, balance sheet repositioning efforts, and rising demand for consumer loans alongside relatively higher interest rates will likely support its financials. However, weak credit quality amid a tough operating backdrop and elevated operating expenses are major near-term headwinds.

Currently, Ally Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of ALLY’s Peers

Capital One COF is slated to announce first-quarter 2025 results on April 22.

Over the past seven days, the Zacks Consensus Estimate for COF’s quarterly earnings remained unchanged at $3.70 per share. This implies a 15.3% increase from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Navient NAVI is slated to announce first-quarter 2025 results on April 30.

Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 11 cents. This implies an 82.5% decline from the prior-year quarter.

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This article originally published on Zacks Investment Research (zacks.com).

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