(Bloomberg) -- Ally Financial Inc.’s shares gained the most since January after the auto lender’s first-quarter results topped Wall Street forecasts.

Adjusted earnings per share for the first three months of the year were 45 cents, more than Wall Street’s 33-cent consensus estimate. Revenue of $1.99 billion beat the average estimate of $1.96 billion; a year earlier, revenue was $2.05 billion.

Net income fell 56% to $129 million. Detroit-based Ally cited lower net financing revenue, more provisions for credit losses and rising noninterest expenses.

Ally’s net interest margin came in at 3.13%, slightly missing expectations of 3.14% and declining from 3.51% a year earlier. The lender previously forecast NIM for the full year between 3.25% and 3.3%, a figure the firm reiterated in an earnings presentation on Thursday. 

“We expect meaningful expansion from here,” Chief Financial Officer Russ Hutchinson said on a call with analysts, though he added that NIM growth “won’t be a straight line.”

Hutchinson said in a separate interview that the growth is driven by portfolio turnover. As new, higher-yielding originations come on to the balance sheet and the lower-yielding paper rolls off, “there’s a natural upward push.”

The stock gained $2.58 to $38.85 at 2:04 p.m. in New York, rising as much as 8.9% earlier in the session after the results were posted.

Auto Rebound

Autos sales have been coming out of their pandemic slump as inventories return to more normal levels, but the outlook is clouded by rising new vehicle prices, falling used car prices and interest-rate hikes, according to Bloomberg Intelligence. US consumers have mostly spent their pandemic-era savings, and Ally has been cautious about extending credit to borrowers with weaker credit amid a record flood of applications.

Interim Chief Executive Officer Doug Timmerman said in a statement that 40% of retail auto volume came from “our highest credit quality tier, positioning us for very attractive risk-adjusted returns going forward.”

Consumer auto originations rose to $9.8 billion from $9.5 billion, beating the $9.65 billion consensus estimate. 

Michael Rhodes, Ally’s next CEO, will officially join the company on April 29. Rhodes joined Ally after a short stint at Discover Financial Services, which is scheduled to be acquired by Capital One Financial Corp. Before joining Discover, Rhodes was group head for Canadian personal banking at Toronto-Dominion Bank.

(Updates with additional CFO comments starting in the fifth paragraph. An earlier version was corrected to delete a reference to missed estimates.)

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