Time To Buy Ally Financial, Credit Suisse Says

In a report published Wednesday, Credit Suisse analyst Moshe Orenbuch upgraded the rating on Ally Financial Inc ALLY from Neutral to Outperform, while raising the price target from $25 to $27, on expectations of improvement in the company's loan growth and capital return.

"We upgrade shares of Ally Financial due to our expectations for better loan originations, stronger capital return, as well as benefits from booking more non-prime assets at the bank and diminishing liability sensitivity, all of which benefit profitability," Orenbuch explained.

Overall, the analyst expects the company to be able to report higher earnings on a lower but more efficient capital base, leading to a 5 percent increase in the core EPS, along with a 60 bps increase in ROE.

Ally Financial reported its Q2 EPS ahead of the estimates and the consensus forecast.

The EPS estimates for 2015, 2016 and 2017 have been raised "due to our expectation for more loan originations, higher consumer loan yields and greater capital return offset by higher provision and lower commercial yields," the Credit Suisse report added.