Ally leaves guidance unchanged amid auto tariff uncertainty

Ally Financial fell short of analysts' expectations for earnings and revenue during the first quarter, as revenue declined substantially from the same period a year earlier due to a one-time balance sheet restructuring.

The auto lending specialist and digital-only bank also left its full-year outlook unchanged amid uncertainty sparked by President Donald Trump's tariffs on imported vehicles.

For the first three months of 2025, Ally posted a net loss of $225 million, compared with a $143 million profit in the same period last year. Analysts polled by S&P had expected a profit of $43.7 million.

The bank explained that the weaker bottom line was primarily driven by a $495 million pre-tax loss that stemmed from a balance sheet restructuring Ally announced last month.

"Those are a one-time item and don't reflect our long-term revenue generation or profitability," Ally Chief Financial Officer Russ Hutchinson told American Banker in an interview Thursday. "We don't expect to do more of those at this point."

Ally reported $1.54 billion in revenue, compared with $1.99 billion in the same period a year prior. That number fell short of expectations of analysts polled by S&P, who expected $1.97 billion of revenue for the first quarter.

Ally reported a loss of 82 cents on a per-share basis. Analysts polled by S&P had expected earnings of 7 cents per share.

Still, Hutchinson told American Banker that the company is pleased with how its core franchises performed in the first quarter, and the results were aligned with its previously released full-year outlook. He said the company's outlook remains unchanged despite the macroeconomic uncertainty surrounding tariffs. 

John Hecht, an analyst at Jefferies, wrote in a research note Thursday that Ally's decision to not to alter its guidance is a positive outcome, given the uncertainty regarding auto tariffs. Trump has imposed a 25% tariff on imported vehicles, and levies on parts are scheduled to take effect next month.

Hecht wrote that Ally's leadership "likely believes it is too early to implement any changes and has adopted a wait-and-see approach, which is consistent with our expectations."

During the first quarter, Ally reported net financing revenue of $1.5 billion, up $10 million year over year. 

"Our performance in the quarter represents solid progress towards our medium-term targets," Hutchinson said. "We talked about our targets in terms of our net interest margin, our retail auto net credit, net credit losses, and also our discipline around expenses and capital. We think the quarter showed solid progress across all three of those things."

At the beginning of the year, Ally announced it was switching gears and turning its focus back on its core functions of consumer auto lending and checking and savings accounts. As part of that shift, the company said it will stop making new mortgage loans.

In January, Ally also announced an agreement to sell its credit card portfolio. The deal is expected to close within the year. Ally only briefly waded into credit cards, having bought its card franchise at the end of 2021.

Chief Executive Officer Michael Rhodes said on the earnings call Thursday the sale was done to both boost profitability and manage interest rate risk.

"The sale of our credit card business has allowed us to further strengthen our balance sheet," he said.

Rhodes, who joined the company in April 2024, called the first-quarter result "solid" and a reflection of the bank's refocus on core products.

"Ally delivered solid first quarter results, reflecting continued momentum across our market-leading franchises — Dealer Financial Services, Deposits, and Corporate Finance," Rhodes said. "Our performance demonstrates the importance of our focused approach, disciplined execution, and unwavering commitment to delivering value for our customers and shareholders."

Ally's auto-finance arm reported  $10.2 billion in consumer originations in the first quarter, largely driven by 3.8 million applications — the bank's highest quarterly application volume ever. 

"[This] once again underscor[es] the strength of our dealer relationships and the scale of our franchise," Rhodes said. "This scale enables us to be highly selective in the loans we book, optimizing both pricing and credit."

Hutchinson highlighted weather-related volatility as a factor in losses. Ally incurred $58 million in net weather losses, an increase of $41 million year over year, marking the highest first quarter ever for weather losses. More than 80% of those losses were due to a three-day storm, which Hutchinson called a "one in 200-year event."

During the call, Rhodes agreed with Hutchinson's assessment of the strength of Ally's overall business, saying that "despite a few unique headwinds in the quarter," the "financial and operational results were solid and aligned with our expectations from January." 

"While we expect some near-term volatility stemming from the changes in trade policy, we are well positioned to effectively serve our customers and will benefit from a stronger economy in the long term," Rhodes said. "Our ability to navigate this environment reflects deliberate actions we have taken to strengthen the company."