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Auto lender Ally Financial reports higher-than-expected earnings

Ally Financial CEO Jeff Brown said Thursday the company’s reported revenue and adjusted earnings per share in the second quarter were the highest since the company went public in 2014.
Ally Financial CEO Jeff Brown said Thursday the company’s reported revenue and adjusted earnings per share in the second quarter were the highest since the company went public in 2014. jsiner@charlotteobserver.com

Online banking firm and auto lender Ally Financial on Thursday reported second-quarter earnings that beat Wall Street expectations, mostly due to higher revenues.

Adjusted Earnings per share stood at 58 cents, 6 cents higher than what Wall Street analysts had expected.

Net income for the quarter was $252 million, down from $360 million a year ago when the company had lower tax expenses. Net financing revenue, which makes up most of the company’s income, was $1.08 billion, up $87 million compared with the same period last year.

CEO Jeff Brown called the reported revenue and adjusted earnings per share the highest since the company went public in 2014.

Detroit-based Ally Financial provides auto loans, online banking, insurance and corporate financial services and is considered one of the biggest auto loan lenders in the U.S. Charlotte is home to many executives of the company, including Brown and a significant employee hub with an employment headcount of about 900 in the area.

Last year, the company acquired Florida-based online broker TradeKing Group – a move that resulted in 100 new jobs for its Charlotte office.

Its auto finance unit reported pre-tax income of $347 million in the period, down $79 million from last year.

“In auto finance, we remain cautious but constructive,” Brown said in a statement. “Used vehicle price declines and loss performance were well within our expectations, and we’re seeing improved profitability in both our consumer and commercial auto portfolios,” he said.

Concerns about auto loan defaults have been on the rise as auto sales climb to a record high and consumers increasingly borrow money to buy pricy cars. In the first quarter of 2017, 3.8 percent of car loan balances were at least 90 days delinquent, according to the Federal Reserve.

Earlier this year, Brown told Bloomberg that verifying income isn’t the norm in the auto industry, and Ally Financial checked incomes on 65 percent of its car loans that are considered subprime, meaning the borrowers have lower credit scores.

Ally’s total deposits increased by $13.4 billion, or 18 percent, to $ 86.2 billion from the same period last year. Retail deposits stood at $71.1 billion, up 16.2 percent.

Despite the higher-than-expected results, Brown said Ally Financial is acting cautiously at a time when the consumer credit environment has increasingly become a concern.

“We are not chasing volumes. We are not chasing risks. And we are not looking at low-margin, no-margin loans. We are simply staying disciplined,” Brown told securities analysts in a conference call.

Shares of Ally Financial stood at $22.76 Thursday morning, up 4.8 percent.

Wei Zhou: 704-358-5240

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