Ally Financial's (ALLY) Q1 core trends were solid, with improving credit metrics and management maintaining confidence in margin expansion over the remainder of the year, which should support higher returns by the end of 2026, RBC Capital Markets said.
Q1 adjusted EPS of $1.11 was impacted by a net $0.18 of adjusting items, including fair value adjustments and original issue discount. Core fundamentals were positive, and RBC anticipates margin trends and credit expectations driving improved returns.
On credit, retail auto metrics are improving, and RBC expects the year-to-date trends to help Ally Financial achieve its full-year outlook. Other highlights included strong retail loan applications, expense control, an active share repurchase program, and optimism around recent capital proposals, the brokerage said Friday in a note.
Guidance assumes a full-year margin of 3.60% to 3.70%, implying increases over the rest of the year, a 2% to 4% increase in average earning assets, flat to a 5% increase in other revenues, and a 1% increase in expenses, according to the note.
RBC raised its 2026 EPS estimate to $5.50 from $5.40 and 2027 estimate to $6.55 from $6.50.
The firm maintained an outperform rating on Ally Financial with a price target of $52.
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