(Bloomberg) — Ally Financial Inc.’s profit fell more than analysts expected as it made fewer auto loans and put aside additional provisions to cover mounting consumer defaults.
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First-quarter net income attributable to common shareholders plummeted to $291 million, or 96 cents a share, from $627 million, or $1.86, a year earlier, the Detroit-based lender said Wednesday in a statement. On an adjusted basis, net income was 82 cents a share, compared with the 86-cent average estimate of analysts surveyed by Bloomberg.
Ally and other auto lenders have toughened underwriting standards as Americans fall behind on car payments at rates not seen since 2009. Car debt is piling up, with some consumers walking into dealerships with $10,000 in negative equity and others struggling to make payments on existing loans.
“As we progress throughout 2023, we continue to see opportunities across all our businesses, but are mindful of the current environment and are making necessary adjustments to manage risks,” Chief Executive Officer Jeffrey Brown said in the statement. “Our focus remains on risk-adjusted returns, which may lead to slightly lower origination levels as we look to tighten underwriting in certain segments that don’t meet return thresholds.”
Shares of the company fell 0.2% to $26.80 at 9:48 a.m. in New York. They have gained 9.7% this year.
Ally reported $446 million in reserves for soured loans in the period. That was less than the $483.8 million average estimate. The provision was $490 million in the fourth quarter. US auto-loan originations fell to $9.5 billion from $11.6 billion a year earlier.
(Adds share performance in fifth paragraph.)
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Source: https://finance.yahoo.com/news/ally-profit-tumbles-highlighting-risks-122304926.html