Ally Financial Inc
Q4 2023 Earnings
Did ALLY Beat Earnings? Q4 2023 Results
Ally Financial navigated a bruising fourth quarter, matching the Street's $0.45 EPS consensus while posting revenue of $2.07 billion, above the $2.00 billion estimate but still down 15.3% from a year ago, as surging funding costs and a $149.00 million goodwill impairment tied to the pending Ally Lending sale weighed heavily on results. GAAP net income attributable to common shareholders collapsed to $49.00 million from $251.00 million in Q4 2022, with net financing revenue sliding $181.00 million year-over-year to $1.49 billion as net interest margin compressed 48 basis points to 3.20%. Provision for credit losses climbed to $587.00 million, reflecting retail auto net charge-offs of 2.21% annualized, though management expects NCO rates to peak in the first half of 2024 before easing as stronger recent vintages mature. Looking ahead, Ally guided full-year 2024 NIM to 3.25%-3.30%, with an exit rate of 3.40%-3.50%, keeping its medium-term targets of 4% NIM, $6.00 EPS, and mid-teens Core ROTCE firmly in view.
- Higher funding costs compressing NIM by 48 bps YoY
- Retail auto portfolio yield expansion of 100 bps YoY to 8.43%
- Estimated retail auto originated yield of 10.81%, up 124 bps YoY
- Credit normalization driving higher provision expense and net charge-offs
- Record retail deposit customer growth of 359,000 net new customers in 2023
- Insurance earned premiums growth driven by higher dealer inventory levels and P&C portfolio expansion
- Goodwill impairment write-down of $149 million related to pending Ally Lending sale
- FDIC special assessment fee of $38 million
- Q4 consolidated NCO rate of 1.77% vs 1.16% in Q4 2022
- Retail auto 30+ day delinquency rate of 4.42% vs 3.56% in Q4 2022
- Insurance combined ratio improved to 94.8% in Q4 from 104.3% in Q3
- Average retail deposit rate increased to 4.15% from 2.45% a year ago
- Core ROTCE declined to 6.9% in Q4 from 17.6% in Q4 2022
- Adjusted efficiency ratio deteriorated to 55.7% in Q4 from 50.6% in Q4 2022
- Q4 repositioning charges of $187 million impacting noninterest expense
“In 2023, a year filled with unique challenges for the financial services industry, Ally demonstrated the strength and resolve that has made us an industry leading financial institution. While cognizant of the highly dynamic environment, we remain focused on building businesses that are resilient through all environments. We ended 2023 with growing momentum and remain positioned for long-term success.”
Ally Financial CEO, on the earnings call
Forward Guidance & Outlook
For FY 2024, Ally guided: Net Interest Margin of 3.25%–3.30% full-year and 3.40%–3.50% exit rate (including ~5 bps negative impact from pending Ally Lending sale and credit card curtailments); Other Revenue up 5–10% YoY; Average Earning Assets flat YoY; Consolidated Net Charge-Offs of 1.4%–1.5% and Retail Auto NCOs of ~1.9%; Adjusted noninterest expense (controllable) down more than 1% YoY, total OPEX up less than 1% YoY; Tax rate of 18%. Management remains confident in medium-term targets of 4% NIM, $6 EPS, and mid-teens Core ROTCE. NCO rates expected to peak in 1H 2024 driven by lower used vehicle values, higher unemployment, and peak losses on 2H 2022 vintage, partially offset by strong front-book performance. Used vehicle values expected to decline ~5% in 1H 2024 then stabilize.
ALLY YoY Financials
ALLY Revenue by Segment
Figures from SEC filings and company reports. Not investment advice.