Profits and consumer auto loan originations fell at Ally Financial in the fourth quarter as the Detroit company expanded into new product lines and landed a financing deal with a fast-growing online auto retailer.
The $163.7 billion-asset company reported net income of $248 million, down 5.7% from the fourth quarter of 2015 as a result of an increased loan-loss provision and noninterest expenses that more than offset higher overall revenues. Adjusted earnings per share were 54 cents, beating analyst expectations by 6 cents.
Ally originated $8.2 billion of U.S. consumer auto loans in the fourth quarter, down nearly 12%. However, total U.S. commercial loans outstanding rose 11%, to $38.9 billion.
Net financing revenue for the full company dropped 0.71% to $976 million.
Ally added $27 million to its provision for loan losses, with an increase in the retail auto loan provision offset somewhat by a shrinking of the reserve for mortgage loans. The total provision was $267 million at year's end.
Noninterest expense increased by 7.9% to $721 million. The higher expenses were due to ongoing growth in deposits and overall auto lending as well as new product initiatives, such as the online brokerage business it acquired earlier in 2016, Ally said in a news release Tuesday.
The company expects to launch its integrated online brokerage and wealth management platform early this year.
Meanwhile, the bank in December introduced a direct-to-consumer mortgage product to diversify revenue and meet customer demand. It also struck a deal with the online auto retailer Carvana to provide up to $600 million in financing to support Carvana's contracts in 2017.
Ally CEO Jeffrey Brown said in the release that he expects earnings to grow rapidly over the next several years.
Total deposits were $79 billion at Dec. 31, up nearly 19%. Ally added 166,000 deposit customers in 2016, yielding a total deposit customer base of 1.2 million at yearend.
The online-only bank continues to be popular with young people. More than 50% of new Ally customers in 2016 were millennials.