Ally(ALLY) ZACKS·2024-10-29 13:21Core Viewpoint - Ally Financial Inc. reported third-quarter 2024 results that exceeded Zacks Consensus Estimates, with both top and bottom lines showing year-over-year growth [1] Financial Performance - Ally Financial's shares declined by 2% following the quarterly results announcement, attributed to a challenging operating environment characterized by high interest rates and inflationary pressures [2] - The company's stock fell 10.2% in the third quarter, contrasting with a 6.2% increase in the industry [3] Asset Quality - A significant concern was the deterioration in asset quality, with a provision for loan losses of 517 million or 1.50%, up from 1.49 billion due to lower average earning assets and higher funding costs [6] - Total other revenues surged by 41.4% year over year to $615 million, supported by growth in insurance and other revenue streams [9] Net Interest Margin (NIM) - The net interest margin contracted by 2 basis points to 3.22%, influenced by the asset-sensitive balance sheet [7] - NIM is projected to be around 3.20% for 2024, down from earlier guidance of approximately 3.30% [11] Strategic Initiatives - Ally Financial is diversifying into mortgage, wealth management, and online brokerage businesses, and launched Ally.ai, an AI platform to enhance operations [12] - The company sold its point-of-sale financing business, Ally Lending, in March 2024 to focus on core business growth [13] Future Outlook - The company anticipates increased loan losses in 2024, with retail auto NCO rates projected between 2.25% and 2.30% [14] - The Zacks Consensus Estimate for 2024 earnings indicates a 1.3% decline year over year, while 2025 earnings are expected to grow by 40.9% [15] Valuation Metrics - Ally Financial stock is currently trading at a 12-month trailing price-to-tangible book (P/TB) ratio of 0.88X, below the industry average of 1.29X [16] - Compared to peers, Ally's stock appears undervalued, with Capital One at 1.33X and SLM at 2.64X [17]