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Ally Financial Reports First Quarter Income Dropped 18%

Steve Goode
Apr 14, 2022

Report includes $1.7 billion in mortgage loan originations.

  • Mortgage originations down due to market trends
  • Company officials bracing for recession in the next two years.

Ally Financial Inc. Thursday reported first quarter net income of $655 million. That's a drop of 18% from where the company was at this point a year ago. 

Among the quarterly highlights, company officials said, were $1.7 billion in direct to consumer mortgage originations, which was relatively flat year-over-year given the contraction in the overall mortgage market. Existing Ally Bank deposit customers accounted for 37% of the quarter’s direct-to-consumer origination volume.

However, pre-tax mortgage finance income fell by 52% to $11 million.

Overall, Ally officials said investors could expect a 16% to 18% return on investment and continued company growth due to the introduction of new products, including mortgage lending services.

Company officials added that Ally had built in an expected recession in the next two years into its reserves and was bracing for an unemployment rate of 6.5% in 2023.

During the earnings call, officials for the Detroit-based company said Ally had achieved a record 52 consecutive quarters of retail deposit growth and had added four new states to its market, which now totals 46 states and Washington D.C.

Company officials said net financing revenue was $1.69 billion, up $321 million year over year, driven by lower funding costs and continued strength in auto pricing and origination volumes, and partially offset by lower commercial auto portfolio balances. 

The company is focused largely on auto loans. Pretax auto finance income fell by 10% to $725 million.

Other revenue decreased $123 million year-over-year to $442 million, largely due to a $66 million decrease in the fair value of equity securities in the quarter compared to a $17 million increase in the fair value of equity securities in the prior-year quarter. Adjusted other revenue, excluding the change in fair value of equity securities, decreased $41 million year over year to $508 million due to elevated investment gains in the prior year, Ally officials said.

“Ally generated another quarter of strong financial and operational results in a rapidly changing market environment,” Ally Chief Executive Officer Jeffery J. Brown said. “First quarter results included record net financing revenue for the seventh consecutive quarter and a core return on tangible common equity of nearly 24 percent.”

Brown said the company’s success is underpinned by years of strategic positioning across established auto and bank franchises, as well as growing momentum in its newer, consumer businesses.

"While the operating environment continues to be dynamic, I remain confident in the businesses we’ve built and our ability to navigate and add value in a variety of market backdrops," he said. "Ally will continue to leverage the strengths of our market-leading positions within auto finance and Ally Bank to deepen, and strengthen, relationships with our growing customer base, now more than 10.5 million strong.” 

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