(Bloomberg) -- Ally Financial Inc. fourth-quarter earnings surged as its net interest margin beat analysts’ estimates and expenses and provisions for bad debt declined. Shares of the company soared as much as 11%.
Net income jumped 74% to $108 million, or 26 cents a share. Loan-loss provisions of $557 million were well below Wall Street analysts’ expectations of $656.9 million.
“As we enter 2025, I am encouraged by strong momentum across our business,” Chief Executive Officer Michael Rhodes said in a statement Wednesday. “This optimism is driven by an improved outlook on credit, a balance sheet well positioned for margin expansion, and continued disciplined management of expenses and capital.”
The net interest margin, or the spread banks earn after they pay interest on deposits, was 3.3%, up 11 basis points from a year earlier.
The firm also announced a deal on Wednesday with CardWorks Inc. to offload its credit-card business and a portfolio of $2.3 billion of loans. Ally said it took a $118 million partial goodwill impairment excluded from its adjusted metrics linked to the sale.
The online lender’s credit quality has stumbled in recent months as net charge-offs in its consumer auto loan portfolio climbed. Auto loans issued in 2022 in particular have struggled due to the combination of inflation, higher used-car prices and rising interest rates.
The fourth-quarter retail auto net charge-off rate increased 13 basis points to 2.34% from a year earlier.
The Detroit-based company also said earlier this month that it would cut less than 5% of its workforce and stop issuing new mortgages this quarter.
The job cuts are expected to generate more than $60 million in savings each year, though Ally said a $22 million restructuring cost was excluded from adjusted metrics.
Shares of the firm rose 8.3% to $41.34 at 8:38 a.m. in early New York trading. They gained 7.4% in the 12 months through Tuesday.
(Updates with additional metrics, starting with goodwill impairment in sixth paragraph.)
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