Ally Financial (NYSE:ALLY) shares rallied as much as 10% Friday after the company reported its latest quarterly earnings, topping consensus revenue estimates. It was also announced that Synchrony Financial (NYSE:SYF) has agreed to buy Ally's point-of-sale financing business, including $2.2 billion of loan receivables.
Ally Lending, its point-of-sale financing business, has a portfolio that includes relationships with nearly 2,500 merchant locations and supports more than 450,000 active borrowers in home improvement services and healthcare.
Meanwhile, Ally reported Q4 EPS of $0.45, in line with the analyst estimate of $0.45, while revenue for the quarter came in at $2.1 billion versus the consensus estimate of $2 billion.
"In 2023, a year filled with unique challenges for the financial services industry, Ally demonstrated the strength and resolve that has made us an industry-leading financial institution,” said the company's CEO, Jeffrey Brown.
He added: “While cognizant of the highly dynamic environment, we remain focused on building businesses that are resilient through all environments. We ended 2023 with growing momentum and remain positioned for long-term success."
Reacting to the earnings report, analysts at Citi maintained a Buy rating and $46 price target on ALLY shares, saying the company reported "good 4Q results."
"Compared to our estimates, provision expenses came in lower and other revenue came in higher, mitigated by lower net financing revenue and modestly higher adjusted noninterest expense," wrote the analysts.
"Non-GAAP adjustments include: 1) $74M of pre-tax FV equity gains; 2) add back $13M of OID; 3) $23M of negative net tax impacts; 4) add back $172M repositioning expenses; and 5) add back $1M positive impact from discontinued operations. ALLY reached an agreement to sell Ally Lending in early 2024, which is expected to add 15bps to CET1," they added.