Ally Financial Q3 Earnings Report This Friday: What’s Up

Ally Financial Inc ALLY will report its third-quarter earnings on Friday morning. Investors are focused on the company’s credit challenges.

In September, CFO Russell Hutchinson mentioned at a conference that there are increasing difficulties for borrowers, especially in retail auto lending.

Tomorrow’s earnings report may provide important details on how these issues have affected Ally’s financial performance in the third quarter.

Key Points: In the second quarter, Ally reported mixed results. Total revenue was $2.08 billion, down 1.6% from last year due to inflation and rising interest rates. Net income dropped to $327 million, a 58% decline, largely due to rising loan losses and provisions for credit losses reaching $490 million. Ally’s net interest margin also decreased from 4.03% to 3.39%.

Ally’s retail auto lending, a key part of its business, faced increasing pressure as borrowers struggled with costs. Auto originations fell to $10.7 billion from $13.3 billion the previous year.

Though demand for auto lending is strong, rising delinquencies and charge-offs indicate more consumers are missing payments. The retail auto delinquency rate rose to 3.81% from 3.53% in the previous quarter.

Future Outlook: In the third quarter, these trends worsened. Hutchinson reported that delinquencies increased by 20 basis points in July and August. Net charge-offs also rose by 10 basis points, driven by high inflation and a weak job market.

Ally’s stock has been volatile as these credit issues raise concerns about managing loan losses. Broader economic uncertainties, including a weaker jobs report, have added to investor worries. Although Ally has not changed its earnings guidance, Hutchinson stressed the importance of capital and cost management during these challenging times.

Analysts will be watching closely for any further deterioration in Ally’s credit metrics in the third-quarter results. Adjustments to guidance could indicate how management plans to address these risks.

Investing in ALLY Stock: If you’re looking to invest in Ally Financial, you can do so through a brokerage account. Many platforms allow you to purchase fractional shares. For example, with Ally trading at $35.93, you could buy 2.78 shares for $100.

To bet against the stock, you would need options trading access. Shorting involves borrowing shares to sell, while buying put options can also profit from a price drop. Ally’s stock has a 52-week high of $45.46 and a low of $22.54.