Ally Financial Earnings: Higher Credit Losses Pressure Results

No-moat-rated Ally Financial's third-quarter earnings were weaker than they first appeared, as higher charge-offs and lower net interest income than we had anticipated were offset by tax benefits. Adjusted earnings per share increased from $0.83 last year but fell from $0.97 last quarter to $0.95. However, the company benefited from $179 million in electric vehicle tax credits, leaving it with a negative effective tax rate for the quarter. Ally passes on these tax credits to its customers in the form of lower lease rates. These tax credits have an accelerated positive impact on its bottom line that is then offset by a long-term headwind to the bank's net interest margin.