Ally Financial (ALLY) reported net income of $177 million, or $0.23 per diluted common share, for the fourth quarter of 2014, compared to net income of $423 million, or $0.74 per diluted common share, in the prior quarter, and net income of $104 million, or a loss of $0.78 per diluted common share, for the fourth quarter of 2013.
The company reported core pre-tax income of $229 million in the fourth quarter of 2014, compared to core pre-tax income of $467 million in the prior quarter and $142 million in the comparable prior year period.
Excluding repositioning items, which were primarily related to the early extinguishment of high-cost legacy debt, the company reported core pre-tax income of $396 million for the quarter. Adjusted earnings per diluted common share2 for the quarter were $0.40, compared to $0.53 for the previous quarter, and a loss of $0.14 for the comparable prior year period.
Results for the quarter were driven by solid operating results from the Dealer Financial Services group, which increased pre-tax income by 45% compared to the prior year period, due in part to the non-recurrence of the $98 million charge related to the Consumer Financial Protection Bureau and U.S. Department of Justice settlement taken in the prior year period.
Overall, significant improvement was made to Ally's noninterest expense which declined by 24% compared to the prior year period, as well as continued improvement in cost of funds, which decreased 31 basis points from the prior year period and 50 basis points for the full year. This was partially offset by expected lower net lease revenue, primarily resulting from lower lease gains.
For the full year 2014, Ally reported net income of $1.2 billion, or $1.83 per diluted common share, compared to net income of $361 million in 2013, or a loss of $1.64 per diluted common share. Core pre-tax income in 2014 totaled $1.4 billion, compared to core pre-tax income of $606 million in the prior year. Excluding repositioning items, Ally reported core pre-tax income of $1.6 billion for 2014, compared to $850 million for 2013. Adjusted earnings per diluted common share for full year 2014 were $1.68, compared to a loss of $0.14 in the prior year.
"The past year's accomplishments – from successful completion of our initial public offering to repayment of TARP – has solidified Ally's standing as a stronger, more focused financial services company," said Chief Executive Officer Michael A. Carpenter. "We began the year with a plan aimed at improving shareholder returns, and significant progress was achieved in 2014 in the areas of net interest margin expansion, expense reduction and regulatory normalization, which all led to a core return on tangible common equity of 7.9% for the year. We remain committed to further improving our core return on tangible common equity as we move through 2015.
"At the foundation of this effort have been two very strong franchises in our dealer financial services and direct banking operations," Carpenter continued. "While we have been transforming our dealer financial services business into a market-driven competitor for several years, in 2014, we began to really accelerate the expansion of our diversification efforts, which now represents 22% of our auto originations and approximately 10,000 active dealers. We are well-positioned to continue the momentum in this area of the business this year."