Ally Financial Inc., a prominent bank, experienced a remarkable surge of nearly 10% in its stock during Friday’s trading session, marking its highest one-day increase in nearly a year. This significant upturn was fueled by the bank’s impressive earnings that surpassed Wall Street estimates, as well as the announcement of the sale of its point-of-sale financing business to Synchrony Financial.
In the fourth quarter, Ally Financial reported a decline in net income to $49 million, or 16 cents per share, compared to $251 million, or 83 cents per share, during the same period last year. Adjusted profit for the quarter also dropped to 45 cents per share, outperforming the FactSet consensus estimate of 44 cents per share.
Although fourth-quarter revenue decreased to $2.07 billion from $2.2 billion in the year-ago quarter, it exceeded the analyst estimate of just under $2 billion.
The surge in Ally Financial’s stock price during the trading session amounted to a 9.8% increase, reaching $35.29 per share. This represents the largest percentage increase since January 20, 2023, when the stock rose by 20%, according to Dow Jones Market Data. Over the past year, Ally Financial’s stock has risen by 11.3%, while the S&P 500 has experienced a 20.9% increase.
The bank’s decision to sell its point-of-sale financing business to Synchrony Financial includes an undisclosed price tag and involves approximately $2.2 billion in loan receivables. Furthermore, this transaction encompasses nearly 2,500 merchant locations and over 450,000 active borrowers in the home improvement services and healthcare sectors.
Ally Financial’s Chief Executive, Jeff (JB) Browns, expressed his satisfaction with the deal, stating that it allows the bank to “continue to be disciplined in allocating capital to optimize risk-adjusted returns as we manage through a dynamic operating environment.”
Upon closing, the transaction is expected to bolster Ally Financial’s CET1 ratio by approximately 0.15% and contribute positively to tangible book value and earnings per share in 2024.