Credit & Capital

Ally Financial’s Q3 Profit Falls 37%

Income from auto financing fell 16.4%, to $347 million, while income from dealer financing fell 18.5%, to $387 million.
Katie Kuehner-HebertOctober 29, 2015

At a hot time for automobile sales, Ally Financial, the GM spinoff, reported that third-quarter profit fell 37%, in part due to losing leasing business from GM.

The Detroit bank on Thursday said that net income fell to $268 million, or 47 cents per share, in the third quarter, down from $423 million, or 74 cents per share, a year earlier. Last year’s third-quarter numbers included $130 million in income from exiting a joint venture in China and a one-time tax benefit from the sale of mortgage servicing operations.

Excluding certain items, the company earned 51 cents per share, in line with analysts’ average estimate, according to Thomson Reuters I/B/E/S.

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“The company has been trying to boost its market share by financing cars made by Ford and Nissan, after General Motors replaced Ally as the exclusive lessor for Buick, GMC, and Cadillac vehicles in February,” Reuters wrote.

Total auto loans made by Ally fell 6%, to $11.1 billion, due both to increased emphasis on loans for car purchases rather than leases, and differences in how the company accounts for those assets on its balance sheet.

Income from auto financing fell 16.4%, to $347 million, while income from dealer financing fell 18.5%, to $387 million.

At Ally Bank, retail deposits rose 15%. Net charge-offs, reflecting write-downs on bad loans, were 0.6%, up from 0.4% in the second quarter.

Guggenheim Securities analyst Eric Wasserstrom said that Ally made good progress reducing expenses and lowering funding costs, Reuters reported.

The lender managed to lift its net interest margin to 2.7% from 2.6% the previous quarter.

The company is still awaiting regulatory approval for the redemption of $1.3 billion in preferred securities related to the billions in emergency loans the federal government provided to Ally, previously GMAC, during the financial crisis. It must redeem the securities before it executes any plan to return capital to shareholders.