Ally Financial Inc.
ALLY,
Wednesday missed third-quarter revenue and earnings targets and gave a weaker-than-expected profit outlook for next quarter, as consumer lenders marked a drop in the value of their home investments. provides digital mortgage services.
Chief Executive Officer Jeffrey J. Brown said the company faces a challenging environment, as it builds greater coverage to “ensure the company remains protected when recessionary conditions take its toll. likely in the coming months.”
Looking forward to the fourth quarter, Ally Financial said it expects earnings of about $1 a share, below Wall Street analyst’s latest estimate of $1.58 a share.
In another worrisome sign, the company said it expected the medium-term net auto loan offset to be 1.6%, a number that represents an amount the company didn’t expect. will be obtained. The 1.6% figure is the top of the 1.4% to 1.6% forecast for net offsets on auto loans.
In the third quarter, total loans increased by $4 billion and resulted in a $133 million increase in provisions. The company also recorded a loss of $136 million from its investment in Better.com to reflect conditions affecting the broader mortgage industry.
All told, Ally Financial’s third-quarter net income fell to $272 million, or 88 cents a share, from $712 million, or $1.89 a share, in the quarter. last year.
Adjusted profit fell to $1.12 a share from $2.16 a share in the previous quarter, while net revenue increased to $2.02 billion from $1.99 billion.
The company also gave an adjusted revenue figure of $2.09 billion.
Wall Street analysts expect Ally Financial to earn $1.69 a share on revenue of $2.16 billion, according to FactSet data.
On Tuesday, the company said Jennifer A. LaClair had left her position as chief financial officer. Bradley J. Brown, the company’s treasurer, has been appointed interim CFO.
Shares of Ally Financial fell 4.5% on Wednesday, amid a mostly intraday drop in share prices.
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The origin of car loans in the third quarter was $12.3 billion unchanged from the previous quarter and down about $1 billion from the second quarter.
Chief executive officer Ally Brown said that while some lenders are pulling out of the auto loan market, a key segment of that market remains strong.
“Primary lending continues to be a very solid space,” Brown said. “The superlative lending business has seen very strong valuations from credit unions and that means some banks are reluctant to pursue that.”
The bank said net profit margin excluding the original issuance discount (OID) was 3.83%, up 15 basis points year-on-year but down 23 basis points from the previous quarter.
“With timing momentum on both sides of the balance sheet, we expect to see some near-term pressure, but remain confident in a 3% net margin,” said CEO Brown. by the time. “We have been building a structurally improved balance sheet for several years, but [we] faces some temporary pressure from the unprecedented speed and intensity of short-term rate hikes. “
Ally said its provision for credit losses increased by $362 million to $438 million, reflecting credit losses that are normalizing to expectations and the current projected credit provision. under construction, in part due to a sharp increase in retail auto-derivative volumes.
Jefferies analyst John Hecht said Ally’s third-quarter net financial revenue was $1.72 billion, beating his estimate of $1.64 billion, thanks to higher initialization volumes and loan growth. increase, which increases funding costs.
Shares of Ally Financial are down 42% in 2022, compared to a 17.8% drop in the Financial Select SPDR ETF
XLF,
and down 22.3% on the S&P 500
SPX,
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