ALLY Q2 Earnings Top on Higher Net Finance Revenues & Lower Provision (Revised)

Core Insights - Ally Financial's second-quarter 2025 adjusted earnings per share (EPS) reached 99 cents, exceeding the Zacks Consensus Estimate of 78 cents, and reflecting a 35.6% increase from the previous year [1][9] - The company's net income attributable to common shareholders on a GAAP basis was $324 million, compared to $191 million in the same quarter last year [2] Revenue and Expenses - Total GAAP net revenues for the quarter were $2.08 billion, a 2.9% increase year-over-year, surpassing the Zacks Consensus Estimate of $2.03 billion [3] - Adjusted total revenues remained unchanged at $2.06 billion compared to the prior year [3] - Net financing revenues grew slightly to $1.53 billion, primarily due to lower funding costs, with an adjusted net interest margin of 3.45%, up 9 basis points [4] - Total other revenues increased by 12.1% year-over-year to $566 million, driven by profits on investments [4] - Total non-interest expenses decreased by 1.8% year-over-year to $1.26 billion, below the estimated $1.28 billion, indicating improved efficiency with an adjusted efficiency ratio of 50.9% [5] Loan and Deposit Trends - As of June 30, 2025, total net finance receivables and loans were $129.8 billion, a slight decline from the previous quarter, while deposits fell by 2.3% to $147.9 billion [6] Credit Quality - Non-performing loans increased by 11.8% year-over-year to $1.36 billion, while net charge-offs decreased by 15.8% to $366 million [7][9] - The provision for loan losses was $384 million, down 15.9% year-over-year, attributed to reserve releases and lower retail auto net charge-offs [8] Capital Ratios - As of June 30, 2025, the total capital ratio improved to 13.2% from 12.7% in the prior year, with the tier 1 capital ratio rising to 11.4% from 11% [10] Strategic Outlook - The company's restructuring initiatives and balance sheet repositioning, along with rising consumer loan demand and lower non-interest expenses, are expected to strengthen financial performance, although weak credit quality poses a near-term challenge [11]