Ally Financial Inc. · NYSE:ALLY
Ally Financial — Investor Presentation (March 2017)
41 slides from Ally Financial's investor presentation, Mar 21, 2017
Slide 1: Ally Financial Inc. Financial Outlook Update
Ally Financial Inc. Financial Outlook Update March 21, 2017 1
Slide 2: Forward-Looking Statements and Additional Information
Forward-Looking Statements and Additional Information This presentation and related communications contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to histori
Slide 3: Agenda
Agenda 1 Summary Outlook Chris Halmy, Chief Financial Officer Chris Halmy, Chief Financial Officer 2 Customer and Products Overview Dave Shevsky, Chief Risk Officer 3 Net Financing Revenue Brad Brown, Corporate Treasurer 4 Near-term Outlook Chris Halmy, Chief Financial Officer CONFIDENTIAL 3
Slide 4: Executive Summary
Executive Summary Deliver consistently improving results Financially Operationally Relentless focus on customer Auto and Deposits are “entry” products Mortgage, Credit Card and Wealth Management as new additions Unmatched expertise in auto lending as a true relationship business Natu
Slide 5: Summary Financial Outlook
Summary Financial Outlook Expect over 15% Adjusted EPS(1) CAGR while driving to 12% Core ROTCE(1) over medium-term Expect 5 - 15% Adjusted EPS(1) growth in 2017 Near-term will be impacted by lease and used vehicle price declines and provision build Capital optimization - repurchasing signifi
Slide 6: Quarterly Adjusted EPS Growth
Quarterly Adjusted EPS(1) Growth Proven ability to grow Adjusted EPS(1) Quarterly Adjusted EPS (1) • Deposit growth • Auto portfolio optimization • Product expansion • Capital return $1.68 $2.00 $2.16 $0.54 $0.56 $0.54 $0.53 $0.52 $0.52 $0.52 $0.51 $0.46 $0.42 $0.40 $0.34 1Q 14 2Q 14 3Q 14 4Q 14 1Q
Slide 7: Driving Higher Shareholder Returns
Driving Higher Shareholder Returns Improving Core ROTCE(1) through efficient capital allocation and earnings growth • Expanding NIM • Increasing noninterest income • Operating leverage • Optimize capital deployment 12% +/- 10% 3% 2013 2016 Medium-term Target 7 (1) Represents a non-GAAP financial mea
Slide 8: Driving Higher Net Financing Revenue
Driving Higher Net Financing Revenue(1) Balance sheet growth and expanding margins drive top-line outlook ($ billions) $5 +/- $4.0 $3.0 2013 2016 Medium-term Target 8 (1) Represents a non-GAAP financial measure. Excludes OID. See page 41 for details.
Slide 9: Driving Positive Operating Leverage
Driving Positive Operating Leverage Proven ability to drive operating leverage given efficient, scalable platform Adjusted Efficiency Ratio (1) 67% 45% Low 40s% 2013 2016 Medium-term Target 9 (1) Represents a non-GAAP financial measure. See page 41 for details.
Slide 10: Customer and Products Overview
1 Summary Outlook Chris Halmy, Chief Financial Officer Chris Halmy, Chief Financial Officer 2 Customer and Products Overview Dave Shevsky, Chief Risk Officer 3 Net Financing Revenue Brad Brown, Corporate Treasurer 4 Near-term Outlook Chris Halmy, Chief Financial Officer CONFIDENTIAL 10
Slide 11: Customer Product Suite
Customer Product Suite A L LY A U T O A L LY I N V E S T INSURANCE DEPOSITS C O R P O R AT E FINANCE CASHBACK CARD Co-brand product(1) A L LY H O M E 11 (1) The Ally CashBack Credit Card is issued by TD Bank N.A.
Slide 12: Customer Growth Through Brand and New Offerings
Customer Growth Through Brand and New Offerings • Stable as retail offsets lease Consumer Auto 4.4 million customers • Large, diversified dealer clients + Deepening existing • 4k commercial loan relationships relationships Commercial Auto 18 thousand dealer relationships + New offerings Retail 1.2 •
Slide 13: Proven Auto Finance Go-To-Market Strategy
Proven Auto Finance Go-To-Market Strategy Unique competitive advantages and capabilities Relationship • Superior service model; multi-generational dealer relationships Based Broadest • Commercial lending, insurance and SmartAuction are differentiators Product Suite Full Spectrum • Super-prime to sub
Slide 14: Auto Finance Products – Market Presence
Auto Finance Products – Market Presence Comprehensive and valuable product suite and full-spectrum credit provider Theme: $66 • 5% market share of 2016 originations(1) Retail Loans billion • Optimizing risk-adjusted returns Commercial $39 • Largest dealer wholesale floorplan financier Loans billion
Slide 15: Auto Finance Successfully Repositioned over 2 Years
Auto Finance Successfully Repositioned over 2 Years Business model much more diversified and better positioned for future Increased focus on profitability over volume − Increased capital optimization alternatives with share buybacks Shift from leasing and subvention to diversified lending − Less
Slide 16: Auto Finance Market Update
Auto Finance Market Update Auto lenders, including Ally, continue to respond to market trends − Higher interest rates and interest rate expectations − Consumer credit losses continue to migrate higher, particularly in lower credit tiers − Declining used vehicle prices − Increasing manufacturer inc
Slide 17: Risk-Adjusted Yield Progression
Risk-Adjusted Yield Progression Expect asset yields to increase more than expected losses 2016 Average 2017 Expectations • Expect continued margin expansion • Expected 1Q 17 origination yield >6% Retail Auto Yield (portfolio) 5.52% 5.8 - 6.0% Annual Losses (portfolio)(1) 1.24% 1.4 - 1.6% Risk- Adjus
Slide 18: Composition of Retail Auto Originations
Composition of Retail Auto Originations Continue to optimize across risk, return and volume Retail auto orginations by FICO score ~$3.7 ~$5.2 nonprime Annual retail auto originations nonprime ($ billions) $36 $33 $30 $27 $30 23% 22% 24% 22% 20% 21% 23% 24% 29% 29% 25% 33% 34% 34% 34% 36% 37% 34% 36%
Slide 19: Retail Auto Portfolio Turnover
Retail Auto Portfolio Turnover Newer, more profitable vintages are becoming a growing portion of the portfolio Estimated Vintage Originated 8% Year 14% 13% Vintage Yield(1) 28% 25% 41% 36% 44% 2017 ~6% 50% YTD 41% 38% 44% 2016 5.8% 33% 39% 2015 5.3% 27% 35% 23% 24% 31% 29% 2014 5.0% 21% 19% 18% 16%
Slide 20: Lease Dynamics
Lease Dynamics Lease yield remains robust despite accelerated used vehicle declines Used Vehicle Indices NADA Index Change YoY 150 0.4% 140 124.9 -0.1% 0.0% 130 124.7 125.7 124.6 120 123.9 -1.6% 122.6 110 114.9 100 110.1 -3.6% -3.5% -3.7% 90 80 -5.8% Aug-14 Sep-14 Nov-14 Dec-14 Jul-15 Aug-15 Nov-15
Slide 21: Mortgage – Enhancing Customer Portfolio
Mortgage – Enhancing Customer Portfolio Portfolio growth driven by bulk purchase activity and direct-to-consumer product • Conforming mortgages to be sold Launched direct-to-consumer product Ally Home® in December 2016 through our partner • Prime jumbo loans retained $1.6 trillion annual mortgag
Slide 22: Ally Invest – Enhancing Customer Portfolio
Ally Invest – Enhancing Customer Portfolio Natural combination of digital, self-directed savings and investing Self-Directed Trading Low fees For the hands-on investor Variety of investment products Ally Managed Portfolios In-depth research tools Automated investing, professionally managed 2
Slide 23: Corporate Finance
Corporate Finance Senior secured leveraged cash flow and asset-based loans to middle market companies Experienced management team and business joined Ally in 1999 − Highly regarded market participant backed by a stable source of capital − Reputation for speed, certainty and reliability throughout
Slide 24: Deposit Growth as Value Driver & Customer Acquirer
Deposit Growth as Value Driver & Customer Acquirer Deposit growth a meaningful driver of franchise value over time Total deposits; $ billions Growth from: • Existing retail customers $115 + • New retail customers • Ally Invest sweep deposits • Brokered $79 $66 $58 $53 $48 $41 $35 2010 2011 2012 2013
Slide 25: Banking Dynamics: Long-Term Convergence of Models
Banking Dynamics: Long-Term Convergence of Models Move towards digital represents long-term tailwind Direct Banking Traditional Banking • Cost effective • Brick & Mortar ~$500 ~$5 • Fewer Products billion of • More products trillion of deposits(1) deposits(2) • Higher rates • Lower rates ~$4 trillio
Slide 26: Deposit Market Growth
Deposit Market Growth Total growth accelerated…. Retail growth accelerated…. ($ trillions) ($ trillions) +6.8% +4.6% $11.6 $10.4 $10.9 +4.8% $5.7 $9.4 $9.8 $8.8 $5.5 $7.7 $7.9 $5.2 $5.1 $5.0 $4.8 $4.8 $4.9 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 The sum of all
Slide 27: Net Financing Revenue
1 Summary Outlook Chris Halmy, Chief Financial Officer Chris Halmy, Chief Financial Officer 2 Customer and Products Overview Dave Shevsky, Chief Risk Officer 3 Net Financing Revenue Brad Brown, Corporate Treasurer 4 Near-term Outlook Chris Halmy, Chief Financial Officer CONFIDENTIAL 27
Slide 28: Expect $5 billion +/- Net Financing Revenue
Expect $5 billion +/- Net Financing Revenue(1) Net Financing Revenue (excluding OID)(1) Growth Simulation Product $5 +/- Auto Portfolio Expansion billion Deposit Optimization $4 Growth + Corporate billion + Higher Loan Finance and Yields and Mortgage growth + Reduce Balances unsecured funding footpr
Slide 29: Asset Mix
Asset Mix Asset growth from capital efficient assets while auto assets relatively flat FY 2016(1) Average Average Medium-term Expectations ($ billions) Balance Yield $ Retail Auto Loan 64 5.5% • Expect normalized balance of approximately $70 billion $ Commercial Auto 35 3.0% • Asset yields expected
Slide 30: Liability Mix
Liability Mix Mix continues to shift towards deposits as the primary funding source 2013 2016 Medium-term Target FHLB / FHLB / Other FHLB / Other Other 5% 9% Unsecured Unsecured Unsecured 16% 27% Deposits 41% Secured Deposits 52% Deposits ~70 - 75% Secured 24% Secured 28% Note: Funding profiles base
Slide 31: Unsecured Maturities
Unsecured Maturities Significant benefit as unsecured debt maturities are replaced with low-cost deposits Ally Unsecured Debt Securities(1) Principal Am ount Illustrative EPS Savings ~$12 billion Outstanding (2) Maturity Date Coupon ($ billions) @ Refi. Cost of:(3) 1.25% 2.00% in maturities (‘17 – ’
Slide 32: Secured Debt Footprint
Secured Debt Footprint Secured funding poised to become more efficient over time as assets move to bank FY 2016 Average Average ($ billions) Balance Yield Expect significant reduction Secured Facilities over the medium-term $ Bank 3 1.3% $ Parent 14 1.6% Fixed vs. Variable Secured Debt ($ billions)
Slide 33: Deposit Re-pricing
Deposit Re-pricing Modeling pass-through rate to steepen over time Betas have been muted during the first two FOMC tightening actions, but are expected to steadily increase over time Ally’s deposit growth expected to outpace balance sheet growth over next several years as funding mix is optimize
Slide 34: Near-term Outlook
1 Summary Outlook Chris Halmy, Chief Financial Officer Chris Halmy, Chief Financial Officer 2 Customer and Products Overview Dave Shevsky, Chief Risk Officer 3 Net Financing Revenue Brad Brown, Corporate Treasurer 4 Near-term Outlook Chris Halmy, Chief Financial Officer CONFIDENTIAL 34
Slide 35: Near-term Outlook
Near-term Outlook 1Q Expectation Commentary • Lease yield of approximately 5.5% impacted by lower Net Financing vehicle prices; expect to improve seasonally in 2Q Fairly flat QoQ Revenue(1) • Expect larger benefit of debt maturities in 2Q Other Revenue Fairly flat QoQ • Expect more benefit from new
Slide 36: Conclusion and Long-term Trajectory
Conclusion and Long-term Trajectory Attractive and achievable financial targets over time Self-help drivers are tangible and meaningful – liability and capital management Quarterly progression subject to manageable variability Interest rate curve Quarterly retail auto loss and lease perfor
Slide 37: Supplemental
Supplemental CONFIDENTIAL 37
Slide 38: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures The following are non-GAAP financial measures which Ally believes are important to the reader of the Consolidated Financial Statements, but which are supplemental to and not a substitute for U.S. GAAP measures: Adjusted Earnings per Share (
Slide 39: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND FY 2016 4Q '16 3Q '16 2Q '16 1Q '16 FY 2015 4Q '15 3Q '15 2Q '15 1Q '15 FY 2014 4Q '14 3Q '14 2Q '14 1Q '14 Numerator ($ millions) GAAP net income available to common shareholders
Slide 40: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Core Return on Tangible Common Equity ("Core ROTCE") FY 2016 FY 2013 Numerator ($ millions) GAAP net income available to common shareholders $ 1,037 $ (688) less: Disc Ops, net of tax 44 55 add b ack: Original issue discount expense ("OID e
Slide 41: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Adjusted Efficiency Ratio FY 2016 FY 2013 Numerator ($ millions) Total noninterest expense $ 2,939 $ 3,405 less: Rep and warrant expense (6) 32 less: Insurance expense 940 999 less: Repositioning items 9 123 Adjusted noninterest expense [a]