(Bloomberg) — Ally Financial Inc. announced fourth-quarter results that topped analysts’ estimates and said it will sell a point-of-sale financing business that includes $2.2 billion of loan receivables to Synchrony Financial.
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The Detroit-based auto lender reported more than $2 billion in revenue, beating analysts’ estimates of $1.99 billion. Consumer auto-loan originations totaled $9.6 billion, less than the $9.69 billion average estimate of analysts in a Bloomberg survey. Adjusted earnings came in at 45 cents a share, according to a statement Friday, topping estimates of 44 cents.
The deal for the point-of-sale unit includes relationships with almost 2,500 merchant locations and supports more than 450,000 active borrowers in home-improvement services and health care, according to a separate statement. Ally said the sale, expected to be completed in the first quarter, will boost its Common Equity Tier 1 ratio by about 15 basis points and add “modestly” to tangible book value and per-share earnings in 2024.
“This transaction allows us to continue to be disciplined in allocating capital to optimize risk-adjusted returns as we manage through a dynamic operating environment,” Chief Executive Officer Jeffrey Brown said in the statement. Terms of the deal weren’t disclosed.
Ally shares rose 4% to $33.40 at 8:41 a.m. in early New York trading. They’ve gained 23% in the past year.
Over the course of last year, a handful of auto lenders pulled back from various parts of the sector, which Ally Chief Financial Officer Russ Hutchinson said last month is favorable for the company. Almost 40% of Ally’s retail auto-loan originations in 2023 were with customers in the highest credit-quality tier, Brown said in the statement.
The auto lender appointed Doug Timmerman as interim CEO earlier this month while the company continues to search for a permanent replacement for Brown, who’s leaving to become president of Hendrick Automotive Group.
The firm has worked to lower expenses over the past year, pausing hiring and then cutting jobs in October. The headcount reductions have resulted in $80 million of annualized expense savings, Ally said Friday.
The company’s net interest margin hit 3.17% in the fourth quarter, below estimates of 3.2%. For all of 2024, NIM is expected to be between 3.25% and 3.3%, Ally said in an earnings presentation, and other revenue is forecast to rise as much as 10%.
(Updates with lack of deal terms in fourth paragraph, shares in fifth, outlook items in last paragraph.)
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