Ally NCOs decline as credit quality stabilizes

Ally Financial's Q3 2024 earnings report showcased solid performance across key financial metrics. The company reported GAAP net income attributable to common shareholders of $330 million, a 23% increase from the prior quarter, with core net income of $295 million, reflecting consistent growth. Earnings per share (EPS) came in at $1.06, exceeding the previous quarter's $0.86, while adjusted EPS stood at $0.95, slightly lower than Q2's $0.97.

Ally reported total GAAP net revenue of $2.1 billion, a slight increase from $2.0 billion in Q2, while adjusted net revenue was consistent at $2.058 billion. The company's net interest margin (NIM) excluding OID was 3.25%, indicating resilience in its core lending operations. Credit trends were a key focus, with provisions for credit losses rising to $645 million, compared to $457 million in the prior quarter. This increase was largely driven by net charge-offs of $517 million, up from $435 million, reflecting a continued rise in loan defaults.

Auto financing remained a core driver of revenue, with retail auto loan originations yielding 9.29%, a slight improvement from the prior quarter's 9.19%. The total retail auto loan portfolio grew steadily, supporting Ally’s leading position in auto financing. However, lease termination volumes declined, which resulted in lower remarketing gains, consistent with the broader market's reduced lease maturities.

On the consumer credit side, Ally’s credit card portfolio saw active cardholders grow to 1.25 million, with a significant rise in outstanding balances. Net charge-offs in the credit card segment remained elevated at 9.9%, but lower than the prior quarter's 12.6%, signaling some stabilization in credit quality.

Operating expenses were well-managed, decreasing 9% to $1.225 billion compared to Q2. The company continued to prioritize expense control and strategic investments in technology and customer acquisition, leading to an adjusted efficiency ratio of 52.1%, down from 53.2%.

Looking ahead, Ally reaffirmed its guidance, projecting a net interest margin of around 3.20% for the full year, with total non-interest expense expected to rise by less than 2%. The company remains confident in its ability to deliver consistent performance, despite a challenging credit environment.

Overall, Ally's Q3 2024 results highlight the company’s strong positioning in the automotive finance sector, disciplined expense management, and robust capital allocation strategy, even as it navigates rising credit costs and macroeconomic headwinds.