One quarter after an expensive balance sheet restructuring, Ally Financial soared past Wall Street's expectations.
In the second quarter, net income for the Detroit-based online bank and auto lender was $324 million, far outpacing analysts' average estimate of $242.62 million, according to S&P. It also marked a 70% increase from the same period last year.
"I am encouraged and energized by the progress we have made as an organization over the first half of the year," CEO Michael Rhodes said in a statement. "Our results demonstrate sound strategic positioning and disciplined execution, contributing to an improving financial trajectory."
Earnings per share came out to $1.04, beating estimates of 77 cents.
Revenue for the quarter rose to $2.08 billion, up 3% year-over-year and surpassing estimates of $2.04 billion, per S&P.
The results were a far cry from this year's first quarter, when Ally underwent a dramatic restructuring of its balance sheet that put many of its numbers in the red. Earnings per share for that period were negative 82 cents, and net income was a loss of $225 million.
This was primarily because Ally had sold off $2.5 billion of its investment portfolio, in order to ease pressure on underwater bonds and free up capital to buy more liquid securities.
The price of this effort was a $250 million loss to Ally's first quarter earnings. Even as analysts predicted the hit, S&P reported that revenue, net income and earnings per share all fell short of their expectations.
In April, Ally CFO Russ Hutchinson
"Those are a one-time item and don't reflect our long-term revenue generation or profitability," Hutchinson said in an interview. "We don't expect to do more of those at this point."
One quarter later, that restructuring appears to have paid off. Much of the Q2 growth in revenue, Ally said in its earnings release, was thanks to a $35 million jump in the value of equity securities.
"These results reflect the power of focus from our 10,000+ colleagues and our ongoing commitment to unlocking the full potential of our core franchises," Rhodes said. "This unified focus strengthens my conviction in the path toward improved returns and long-term shareholder value creation."
But not every part of the business grew. Auto finance — Ally's bread and butter since its early days as a unit of General Motors — took in $472 million, down $112 million from the second quarter of 2024. Ally said this was due to lower net financing revenue, caused by a decrease in lease gains and commercial assets.
Ally's insurance segment fared better, taking in $28 million in income — up from a $40 million loss in the same period last year.
Dealer Financial Services, which helps finance car dealerships, earned $500 million in the second quarter, down $44 million year-over-year. On the other hand, the department generated $11 billion in auto loan originations, drawn from what the bank called a "record" 3.9 million consumer applications.
"Looking ahead, I am confident in the momentum across each of our businesses," Rhodes said. "With market-leading franchises, a powerful brand, and a culture that sets us apart, Ally is operating from a position of strength."
