Ally Financial Posts Profit That Beats Estimates 

Ally Financial Inc. posted third-quarter profit that beat analyst estimates even as consumers struggled to make loan payments.

(Bloomberg) — Ally Financial Inc. posted third-quarter profit that beat analyst estimates even as consumers struggled to make loan payments.

The Detroit-based auto lender reported $269 million of net income, or 88 cents a share, in the three months ended Sept. 30, according to a statement Wednesday. On an adjusted basis, net income was 83 cents per share, compared with the 79-cent average estimate of analysts surveyed by Bloomberg.

“The interest rate backdrop, including high short-term rates, affected third-quarter results and will continue to do so in the near-term as the balance sheet gradually reprices,” Chief Executive Officer Jeffrey Brown said in the statement. “As we navigate a dynamic market backdrop, we remain focused on the controllables and have taken steps to prepare for a variety of operating environments.”

Ally started job cuts across the firm earlier this month, affecting less than 5% of overall headcount. The company cited the “challenging macro environment” as necessitating the staff reductions after it tried to manage expenses through employee attrition.

Such “proactive expense management” measures will produce $80 million annually in savings through lower headcount, the firm said in Wednesday’s statement.

Shares climbed 3.4% to $26.26 at 10:27 a.m. in New York, and are up 7.2% this year.

The bank is best known for being a leading provider for auto financing in the US, but also offers home loans and credit cards. Consumers are grappling with the Federal Reserve’s interest rate hike campaign and what a higher-for-longer rate means for their expenses, translating into fewer consumer originations. Ally reported $10.6 billion in total consumer auto originations for the third quarter, down from $12.3 billion a year prior.

Net charge-offs in the quarter increased to $456 million from $276 million a year earlier. Chief Financial Officer Russell Hutchinson said on a call with analysts that the firm is still on track to hit the previously announced full-year net charge-off rate of 1.8%.

Ally recently announced that Brown, 50, will be stepping down as CEO to become president of car dealership franchise Hendrick Automotive Group. Brown said on the call that his departure was not linked to operational concerns. 

Net interest margin — or the difference between what a lender charges borrowers and pays depositors — fell to 3.24% from 3.81% a year earlier, missing analyst estimates of 3.33%.

(Updates share price in sixth paragraph, adds origination volume in seventh.)

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