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Ally Financial Earnings Top on Revenue Growth, Provisions Up

Ally Financial Inc.ALLY reported fourth-quarter 2015 adjusted earnings of 52 cents, which surpassed the Zacks Consensus Estimate by a penny. Moreover, earnings rose 30% above the year-ago quarter figure.

Ally Financial Inc. (ALLY) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany

On a GAAP basis, the company reported a loss of $1.97 per share in the quarter, primarily driven by the redemption of $1.3 billion of Series G preferred securities.

For 2015, adjusted earnings of $2.00 per share came in line with the Zacks Consensus Estimate. Further, the bottom-line increased 19% from the prior-year figure. Including the redemption of the above-mentioned securities, the company reported a GAAP loss of $2.66 per share for the year.

Results were driven by a rise in revenues and lower controllable expenses, partially offset by higher provisions. Further, growth in finance receivables and loans was the tailwind.

Ally Financial reported net income of $263 million, surging 49% year over year. For 2015, net income came in at $1.29 billion, up 12% from the previous year.

Performance in Detail

Total net revenue came in at $1.34 billion, up 32% year over year. Moreover, the figure outpaced the Zacks Consensus Estimate of $1.33 billion.

For 2015, total net revenue was $4.86 billion, up 5% from the prior year. However, the figure missed the Zacks Consensus Estimate of $5.09 billion.

Controllable expenses fell 3% year over year to $466 million. The decrease was largely driven by initiatives undertaken to streamline the business. However, other non-interest expenses increased 5% year over year to $202 million.

Total finance receivables and loans stood at $110.5 billion as of Dec 31, 2015, up 12% year over year. Further, total deposits summed $66.5 billion, up 14% year over year.

Ally Financial's credit quality weakened during the quarter. Non-performing loans rose 17% year over year to $753 million as of Dec 31, 2015. Moreover, provision for loan losses increased 55% year over year to $240 million.

As of Dec 31, 2015, total capital ratio came in at 12.5%, while Tier I capital ratio stood at 11.1%.

Our Take

While Ally Financial has streamlined its operations, de-risked balance sheet and enhanced its focus on increased risk-adjusted returns, it continues to explore additional products, services and technologies to boost further growth. However, we remain concerned about the high debt level, stringent regulations and concentration risk taking a toll on the company's profitability going forward.

Currently, Ally Financial carries a Zacks Rank #3 (Hold).

Performance of Other Companies

Capital One Financial Corporation's COF fourth-quarter 2015 adjusted earnings of $1.67 per share easily surpassed the Zacks Consensus Estimate of $1.61.

Similarly, Sallie Mae SLM reported fourth-quarter 2015 core earnings of 20 cents per share, outpacing the Zacks Consensus Estimate of 18 cents.

However, Navient Corporation's NAVI fourth-quarter 2015 core earnings of 48 cents per share missed the Zacks Consensus Estimate by a penny.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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