Ally Financial Beats Q4 Estimates, Sells Credit Card Business to CardWorks

Key Takeaways

Shares in Ally Financial (ALLY) soared on Wednesday, following their announcement of Q4 earnings and revenue numbers that bested estimates. This surge was largely attributable to cost-cutting measures and the news of their credit card business’s impending sale.

All-Digital Banking and Auto Loans

As an all-digital bank and auto loan provider, Ally posted adjusted earnings per share of 78 cents for the fourth quarter. Despite revenue experiencing a 2.4% year-over-year decrease to $2.03 billion, both these numbers surpassed Visible Alpha analysts’ expectations.

Financial Actions by Ally

CEO Michael Rhodes stated that Ally “took significant action” during the quarter. This included workforce reductions and changes to corporate expense allocations and reporting segments. This shift in financial planning and operations contributed to the company’s improved financial performance.

Credit Card Business Sale

In addition to these financial changes, Ally announced the impending acquisition of its credit card business by CardWorks and its subsidiary Merrick Bank. While the exact details of the acquisition remain undisclosed, Ally’s credit card business boasts a $2.3 billion portfolio and 1.3 million active cardholders as of the end of last year.

Rhodes explained that this move aligns with Ally’s broader strategy to “pursue a more focused approach, enabling us to simplify and streamline our structure, prioritize our core businesses, and drive improved returns”.

Dan Pillemer, CardWorks CEO, indicated that this purchase expands the company’s near-prime credit card business, with the deal expected to be finalized within the year.

Following this wave of positive news, Ally Financial shares experienced more than a 4% increase, reaching $39.84 in intraday trading on Wednesday and marking an approximately 11% gain since the start of the year.