Ally Financial Inc., one of the nation’s largest auto-retail lenders, today reported a 5.7 percent decline in fourth-quarter net income, to $248 million, as consumer auto loan and lease originations fell.
Ally said the smaller profit was due to higher provisions for loan losses — primarily in automotive lending — which rose 11 percent from a year earlier to $267 million, and higher noninterest expenses, which increased 7.9 percent to $721 million.
Net financing revenue edged down 0.4 percent to $991 million. Revenue from other sources gained 10 percent to $392 million due in part to higher auto-finance fee income, Ally said.
Auto loan and lease originations in the fourth quarter fell 12 percent year-over-year to $8.2 billion. Of those originations, 86 percent were funded via Ally Bank, up from 76 percent a year earlier.
Mix of business
General Motors dealers accounted for about 37 percent of originations, down from 40 percent a year earlier. Fiat Chrysler dealer originations rose 1 percentage point to 27 percent, while other brands accounted for 36 percent, up from 33 percent a year earlier.
Used-vehicle volume accounted for 41 percent of Ally’s originations, up from 37 percent a year earlier, while leases accounted for 8 percent, down from 11 percent. The remainder was new retail, including subvented new retail of 1 percent this year vs. 3 percent a year earlier.
“Long term, we remain focused on plans to gradually diversify the asset base and sources of revenue,” Ally CEO Jeffrey Brown said in a statement. “Efforts to expand other parts of the company are generating real results, including the corporate finance group which saw a 42 percent increase in pre-tax income.”
Ally’s auto financing unit reported pretax income of $298 million on the quarter, a drop of about 11 percent. Ally attributed the income decline to “lower lease revenue from a smaller lease portfolio, as well as lower lease gains resulting from declining used vehicle values.”
Add in automotive insurance pretax income of $69 million, down 12 percent, and pretax income from dealer financial services slipped 11 percent to $367 million.
Net financing revenue in the auto financing unit rose 0.7 percent to $907 million, a gain Ally attributed to “deliberate pricing actions more than offsetting lower lease gains.”
For the full year, Ally’s net income fell 17 percent to $1.07 billion.
The net income drop came despite a 5.3 percent rise in annual net financing revenue to $3.96 billion. Ally said it received $392 million in income from the sale of a Chinese joint venture in 2015, accounting for much of the decline in income in 2016.
Auto originations on the year fell 12 percent to $36 billion.
“In 2016, Ally made significant progress in its evolution as a leading, digital financial services company, and has strong momentum heading into 2017,” Brown said.