Ally Financial (ALLY) Down 3.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Ally Financial (ALLY). Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Ally Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

Ally Financial Q2 Earnings Lag on Higher Provisions & Costs

Ally Financial’s second-quarter 2026 adjusted earnings of $1.21 per share lagged the Zacks Consensus Estimate of $1.25. However, the bottom line reflected a 22% jump from the year-ago quarter.

Results were primarily hampered by higher expenses and provisions. However, growth in net financing revenues and other revenues, an increase in loan balances and an improvement in NIM offered support to some extent.

After considering non-recurring items, net income attributable to common shareholders (GAAP basis) was $367 million, up 13.3% from the prior-year quarter.

Revenues Improve, Expenses Rise

Total quarterly GAAP net revenues were $2.29 billion, up 9.8% from the prior-year quarter. Also, the top line beat the Zacks Consensus Estimate of $2.21 billion. Adjusted total revenues were $2.28 billion, up 10.3% year over year.

Net financing revenues grew 11.1% year over year to $1.68 billion. The rise was primarily driven by growth in retail and commercial auto assets. NIM (excluding OID) was 3.63%, up 18 basis points year over year.

Total other revenues were $602 million, up 6.4% from $566 million in the prior-year quarter. Adjusted other revenues were $573 million, up 7.9% year over year, driven by momentum across diversified revenue streams, including Insurance, SmartAuction and Passthrough programs. 

Total non-interest expenses increased 4.5% to $1.32 billion from $1.26 billion in the prior-year quarter. The rise reflected higher compensation and benefits, insurance losses and other operating expenses.

The adjusted efficiency ratio was 48.7%, down from 50.9% in the year-ago period. A fall in the efficiency ratio indicates an improvement in profitability.

Loans & Deposit Balances Rise

As of June 30, 2026, total finance receivables and loans, net of allowance, amounted to $140.1 billion, up 2.7% sequentially. Deposits also increased marginally on a sequential basis to $154.1 billion.

Credit Quality: Mixed Bag

Non-performing loans were $1.23 billion as of June 30, 2026, down 9.8% year over year.

In the reported quarter, Ally Financial recorded net charge-offs of $394 million, up 7.7% from the prior-year quarter. Provision for credit losses increased 12% year over year to $430 million. The rise reflected a CECL reserve build related to asset growth, partly offset by continued improvement in credit trends.

Capital Ratios Improve

As of June 30, 2026, the total capital ratio was 13.2%, unchanged from the prior-year period. The tier 1 capital ratio was 11.4%, also unchanged year over year.

The common equity tier 1 (CET1) capital ratio increased to 10.1% from 9.9% in the prior-year period. The tangible common equity-to-tangible assets ratio was 6.7%.

Update on Share Repurchases

During the quarter, the company repurchased $148 million worth of shares.

2026 Outlook

The company expects NIM (excluding OID) to be in the 3.60-3.70% range. Management assumes one Fed rate hike in September 2026.

Average earning assets are expected to rise 3-5% year over year, changed from the previous guidance range of 2-4%.

Adjusted other revenues are expected to be flat or rise 5% year over year.

Adjusted non-interest expenses are expected to increase about 1%. 

Retail auto NCO rates are projected to be 1.8-2%. Consolidated NCO rates are likely to be 1.2-1.3%.

The tax rate is expected to be 20-22%.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Ally Financial has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a score of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Ally Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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