Hot Stock Alert: Ally Financial Inc. (NYSE: ALLY)

On Tuesday, Shares of Ally Financial Inc. (NYSE: ALLY) showed the bearish trend with a lower momentum of -0.45% and ended its trading session at $28.57. The company traded total volume of 2,420,049 shares as contrast to its average volume of 3.49M shares. The company has a market value of $12.63B and about 441.98M shares outstanding. During the 52-week trading session, the minimum price at which share price traded was registered at $18.11 and reached the max level of $31.29.

Ally Financial Inc. (ALLY) recently stated its full year and fourth quarter 2017 financial results.

Net income attributable to common shareholders was $929.0M, compared to $1,037.0M in the prior year. Results were impacted by a $119.0M charge to net income largely due to a revaluation of Ally’s net DTA in 4Q 2017 as well as a $98.0M tax benefit in 2Q 2016 from a tax reserve release. Further, increased net financing revenue was offset by higher noninterest expense and provision for loan losses, as Ally invested in establishing new businesses and growing existing businesses while shifting to originate a more profitable auto loan portfolio mix, which has now largely normalized.

Net financing revenue, including $71.0M of OID expense, improved to $4.20B, up $314.0M from the prior year, driven by the expansion of retail loan and commercial margins, higher asset balances and strong deposit growth more than offsetting a decline in net lease revenue. Other revenue was $1.50B for 2017, up $14.0M over the prior year.

Provision for loan losses increased $231.0M over 2016, due to the deliberate shift to originate a more profitable full credit spectrum portfolio mix as well as higher loan balances and additional reserves associated with the hurricanes experienced in the third quarter of 2017.

Full year NIM was 2.71%, including OID of 5 basis points, up 8 basis points year-over-year. Excluding OID, NIM was 2.76%, improving 9 basis points year-over-year, driven by higher retail and commercial auto margins.

Auto originations totaled $34.70B in 2017, down from $36.00B in 2016, given the continued focus on portfolio optimization and risk-adjusted returns.

Fourth Quarter:

Net income decreased $67.0M versus the prior year quarter to $181.0M primarily due to a revaluation of Ally’s net DTA associated with tax reform. Pre-tax income was $30.0M higher year-over-year due to higher net financing revenue, partially offset by higher provision for loan losses and higher noninterest expense.

Other revenue decreased $13.0M year-over-year, as higher insurance revenue earned was offset by lower investment gains.

Provision for loan losses increased $27.0M to $294.0M, compared to the prior year quarter, driven by higher retail auto charge-offs as well as a reserve release in Mortgage Finance in the prior year quarter.

Noninterest expense was up $48.0M year-over-year due primarily to expenses related to new product expansion.

Capital:

Approximately $937.0M of capital was returned to common shareholders in 2017. Ally repurchased $753.0M of common stock, or approximately 34.10M shares, during the year, including shares withheld to cover income taxes owed by participants related to share-based incentive plans. Since initiating share repurchases in July 2016, Ally has repurchased 51.20M shares and its outstanding share count has declined by 9.7%. During 2017, Ally paid four quarterly common dividends totaling $0.40 per share and increased the dividend per share from $0.08 in the second quarter of 2017 to $0.12 in the third quarter of 2017. Ally’s Board of Directors approved a $0.13 per share dividend for the first quarter of 2018, reflecting a $0.01 increase per share relative to the prior quarter dividend.

Total equity was $13.50B at quarter-end, up from $13.30B a year ago, and down from $13.60B in the prior quarter. Preliminary fully phased-in Basel III Common Equity Tier 1 (CET1) capital ratioB declined to 9.5% from 9.6% in the prior quarter due to growth in risk-weighted assets as well as the tax reform driven revaluation of Ally’s net DTA.

Liquidity & Funding:

Consolidated cash and cash equivalents of $4.30B at quarter-end were down from $4.40B at the end of the third quarter. Total available liquidity was $18.10B at quarter-end.

U.S. auto securitizations totaled $1.40B in the quarter. For the year, the company had $7.30B in domestic term auto securitization activity and renewed $5.20B of secured credit facilities. Approximately 82% of Ally’s total assets were funded at Ally Bank at year-end. Deposits represented approximately 62% of Ally’s funding portfolio at year-end, excluding Core OID balance, improving from 54% a year ago.

Deposits:

Total deposits at Ally Bank grew to $93.30B at year-end. Retail deposits increased to $77.90B at year-end, up $3.00B for the quarter and up a record $11.30B year-over-year, with growth predominately driven by CD products.

The average retail deposit rate was 1.30% for the quarter, up 20 bps year-over-year, and up 7 bps quarter-over-quarter.

Deposit customer base grew 16% year-over-year, totaling 1.40M customers at year-end, while adding nearly 200.0K customers in 2017. Millennials continue to comprise the largest generation segment of new customers at 53% as of quarter-end.

The Company offered net profit margin of 11.20%. ROE was recorded as 6.90% while beta factor was 1.35. The stock, as of recent close, has shown the weekly upbeat performance of 1.60% which was maintained at -2.02% in this year.

Melinda Duque

Finance Reporter

I am Melinda Duque and I give “The Stock Gem” an insight into the most recent news hitting the “Financial” sector in Wall Street. I have been an independent financial adviser for over 11 years in the city and in recent years turned my experience in finance and passion for journalism into a full time role. I perform analysis of Companies and publicize valuable information for shareholder community.

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Phone: (+1) 210-203-1048

Email: melinda.duque@thestockgem.com

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