Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q4 2017 Earnings Presentation
47 slides from Ally Financial's earnings presentation, Jan 30, 2018
Slide 1: Ally Financial Inc. 4Q 2017 Earnings Review
Ally Financial Inc. 4Q 2017 Earnings Review January 30, 2018 Contact Ally Investor Relations at (866) 710-4623 or investor.relations@ally.com
Slide 2: Forward-Looking Statements and Additional Information
Forward-Looking Statements and Additional Information This presentation and related communications should be read in conjunction with the financial statements, notes, and other information contained in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
Slide 3: GAAP and Core Results - Annual
GAAP and Core Results - Annual 2017 2016 2015 GAAP net income attributable to common shareholders ("NIAC") $ 929 $ 1,037 $ (1,282) (1)(2) Core net income attributable to common shareholders $ 1,091 $ 1,043 $ 967 GAAP earnings per common share ("EPS") (diluted, NIAC) $ 2.04 $ 2.15 $ (2.66) Adjusted E
Slide 4: GAAP and Core Results - Quarterly
GAAP and Core Results - Quarterly 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 GAAP net income attributable to common shareholders ("NIAC") $ 181 $ 282 $ 252 $ 214 $ 248 (1)(2) Core net income attributable to common shareholders $ 310 $ 292 $ 265 $ 224 $ 256 GAAP earnings per common share ("EPS") (diluted, NIAC) $
Slide 5: 2017 Highlights
2017 Highlights Adjusted EPS(1) of $2.39 up 11% YoY ‒ Excludes $0.27 tax reform impact in 4Q Total Net Revenue (Adj.)(1) of $5.8 billion, up $338 million YoY Continued strong deposit and customer growth ‒ $14.2 billion total deposit growth and an increase of ~200k retail deposit customers $3
Slide 6: 2017 Targets Achieved
2017 Targets Achieved Targets Actuals Adjusted EPS(1) 5 – 15% 11% Growth Core ROTCE(1) 10% +/- 9.8% Adjusted 45 - 47% 45.8% Efficiency Ratio(1) Retail Auto Net 1.4 – 1.6% 1.48% Charge-offs Lease Yield 5.6 – 6.0% 6.4% $12+ billion $14.2 billion Deposit Growth 4Q 2017 Preliminary Results 6 (1) Represe
Slide 7: Core Metric Trend
Core Metric Trend Adjusted Earnings per Share(1) Adjusted Total Net Revenue(2) ($ millio ns) $0.70 $1,480 $1,492 $1,472 $0.65 $0.58 $1,399 $379 $0.56 $1,383 $1,391 $388 $381 $0.54 $0.54 $1,372 $0.52 $0.52 $0.52 $1,353 $1,344 $0.51 $0.48 $1,313 $388 $0.46 $1,301 $1,295 $374 $392 $396 $358 $0.40 $332
Slide 8: 2018 Priorities
2018 Priorities Deliver significant and sustainable growth in deposits and customers, while optimizing the cost of funds Maintain a leading, respected, and growing brand, while positioning as the pre- eminent digital bank Continue to enhance performance of Auto Finance and Insurance and positi
Slide 9: Tax Reform Perspective
Tax Reform Perspective Employee $1,000 one-time bonus for eligible employees and Community $6 million increase in non-profit contributions in local communities Investment Support new and used vehicle sales Potential Support used vehicle prices Economic Increase consumer debt service abilit
Slide 10: Tax Reform Financial Impact
Tax Reform Financial Impact Long-term Ongoing Expect ETR of 23% - 24% Effective Tax Continue to opportunistically target tax strategies to reduce Rate ETR post tax reform Deferred Tax $119 million tax expense from change to US tax law Asset Revaluation of deferred tax balances from 35% to 21
Slide 11: Full Year and Fourth Quarter Financial Results
Full Year and Fourth Quarter Financial Results Increase / (Decrease) vs. ($ millions except per share data) 4Q 17 3Q 17 4Q 16 FY 2017 FY 2016 (1) Net financing revenue (excluding Core OID) $ 1,113 $ 1,099 $ 991 $ 4,292 $ 3,964 Core OID (19) (18) (15) (71) (57) Net financing revenue (as reported) 1,0
Slide 12: Adjusted EPS Growth
Adjusted EPS(1) Growth Successfully navigated business transition to deliver consistent earnings growth Expect earnings growth to accelerate: • Tax reform • Lease portfolio and $2.39 provision expense normalizing $2.16 $2.00 $1.68 2014 2015 2016 2017 (1) Represents a non-GAAP financial measure. See
Slide 13: Total Net Revenue (Adj.)
Total Net Revenue (Adj.)(1) Consistent revenue growth driven by deposit growth and balance sheet optimization ($ millions) $5,836 $5,498 $5,262 $4,985 $4,292 $3,964 $3,764 $3,547 $1,438 $1,498 $1,534 $1,544 2014 2015 2016 2017 (1) (1) Adjusted Other Revenue Net Financing Revenue (excld Core OID) (1)
Slide 14: Net Financing Revenue (excld Core OID)
Net Financing Revenue (excld Core OID)(1) Successfully offsetting lease decline with more diversified asset mix ($ millions) $4,292 $3,964 $3,764 $3,547 2.76% 2.67% $2,902 $3,230 $3,821 $2,580 2.60% 2.54% $967 $862 $733 $471 2014 2015 2016 2017 (1) (1) Lease Net Financing Revenue Net Financing Reven
Slide 15: Other Revenue (Adj.)
Other Revenue (Adj.)(1) Consistent noninterest income supported by Insurance and SmartAuction ($ millions) $1,498 $1,534 $1,544 $1,438 $79 $189 $185 $127 $202 $103 $103 $112 $101 $102 $185 $181 $65 $155 $11 $57 $31 $31 $51 $45 $64 $986 $948 $952 $981 ($32) 2014 2015 2016 2017 Insurance Auto servicin
Slide 16: Provision Expense
Provision Expense Provision expense up due to loan growth and asset mix transition ($ millions) $1,148 $91 $48 $917 $20 $97 $707 $130 $147 $457 $1,010 $801 $609 $537 ($33) ($228) ~$130 due to transfer of TDR loans to held- 2014 for-sale 2015 2016 2017 Net losses Loan growth (adjusted for impact of l
Slide 17: Noninterest Expense
Noninterest Expense Maintaining expense efficiency while investing in technology and product expansion ($ millions) $3,110 $2,948 $2,939 $129 $2,761 $59 $950 $988 $940 $879 50.8% $1,960 $1,940 $2,031 $1,882 45.3% 45.4% 45.8% 2014 2015 2016 2017 (2) (3) (4) (1) Other noninterest expense Insurance exp
Slide 18: Earning Asset Growth
Earning Asset Growth Capital efficient asset growth while auto balances normalize ($ billions; end of period balances) $160.7 $156.1 $151.4 $143.2 $68.1 $65.8 $64.2 $58.1 $8.7 $11.5 $16.3 $19.5 $37.1 $38.9 $34.9 $34.0 $29.2 $23.7 $25.8 $22.3 $3.2 $4.0 $1.8 $2.6 $9.8 $11.1 $13.7 $7.5 2014 2015 2016 2
Slide 19: Deposit Growth
Deposit Growth Deposit growth momentum supported by both new and existing customer expansion ($ billions, end of period balances) Total +$14.2 Deposits +$11.3 +$2.9 Brokered / Other $93.3 Retail Deposit Existing Growth +$2.9 Retail Customers New +$8.4 Retail Customers +$12.5 Total Deposits +$1.4 Bro
Slide 20: Net Interest Margin
Net Interest Margin • Full year Net Interest Margin (ex Core OID)(1) (“NIM”) of 2.76% up 9 bps YoY driven by higher retail and commercial auto margins − Net Financing Revenue (ex Core OID)(1) up $328 million YoY driven by NIM expansion, as well as asset and deposit growth • 4Q 17 NIM increase QoQ du
Slide 21: Deposits
Deposits • Record annual retail deposit growth – retail deposits Stable, consistent growth of retail deposits up $11.3 billion YoY Deposit Levels (EOP) ($ billions) − Strong quarterly deposit growth up $3.0 billion $86.2 $90.1 $93.3 $84.5 $79.0 $15.3 $15.2 $14.5 $15.1 • Average retail portfolio depo
Slide 22: Capital
Capital • Preliminary fully phased-in Basel III CET1 ratio of 9.5% Capital Ratios(1) and Risk-Weighted Assets − Expect 5 - 10 bps net impact to CET1 in 1Q 18 given adoption of new accounting pronouncements 13.2% 12.9% 12.5% 12.7% 12.8% • RWA flat while earning assets increased ~$5 billion YoY 10.9%
Slide 23: Asset Quality
Asset Quality Consolidated Net Charge-Offs Provision Expense ($ millions) 1.01% Provision Expense 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 0.88% 0.86% 0.85% 0.75% Retail Auto $ 269 $ 275 $ 267 $ 260 $ 314 $ 286 0.64% 0.66% 0.54% Commercial Auto 1 - 1 6 (2) 2 Mortgage Finance 1 (8) 1 1 4 2 Corporate Finan
Slide 24: Auto Finance – Results
Auto Finance – Results • Auto Finance reported pre-tax income of $285 million in Increase/(Decrease) vs. 4Q, down $13 million YoY and down $15 million QoQ Key Financials ($ millions) 4Q 17 3Q 17 4Q 16 Net financing revenue $ 939 $ (11) $ 32 – Net financing revenue up YoY due to higher retail Total o
Slide 25: Auto Finance – Key Metrics
Auto Finance – Key Metrics Consumer Originations Origination Mix ($ billions; % of $ originations) (% of $ originations) $9.3 $9.1 $8.9 $8.6 40% 41% 47% 45% 42% $8.2 $8.1 48% 36% 39% 36% 40% 41% 8% 40% 11% 10% 13% 11% 14% 29% 29% 27% 28% 30% 28% 49% 50% 44% 44% 42% 40% 35% 37% 32% 30% 32% 32% 3Q 16
Slide 26: Insurance
Insurance • Pre-tax income of $80 million up $11 million YoY and Increase/(Decrease) vs. QoQ Key Financials ($ millions) 4Q 17 3Q 17 4Q 16 Premiums, service revenue earned and other $ 257 $ 2 $ 13 – Earned premiums up driven primarily by higher Losses and loss adjustment expenses 54 (11) (1) Acquisi
Slide 27: Corporate Finance
Corporate Finance • Pre-tax income of $32 million, up $1 million YoY and up Increase/(Decrease) vs. $10 million QoQ Key Financials ($ millions) 4Q 17 3Q 17 4Q 16 Net financing revenue $ 46 $ 7 $ 12 – Net financing revenue up YoY and QoQ driven by Total other revenue 12 7 - strong loan growth Total n
Slide 28: Mortgage Finance
Mortgage Finance • Pre-tax income of $2 million, down $13 million YoY Increase/(Decrease) vs. and flat QoQ Key Financials ($ millions) 4Q 17 3Q 17 4Q 16 Net financing revenue $ 34 $ 2 $ 8 – Higher net financing revenue YoY driven by asset Total other revenue 1 (1) 1 balance growth from bulk purchase
Slide 29: Conclusion: Building the leading digital bank
Conclusion Another strong year of executing financial path Deposit growth and expanding risk-adjusted asset yields support further earnings growth Tax reform supports accelerated earnings growth Successfully navigating cyclical dynamics in auto finance Focused on building scale in product
Slide 30: Supplemental Charts
Supplemental Charts
Slide 31: Results by Segment
Supplemental Results by Segment Pre-Tax Income Increase/(Decrease) vs. ($ millions) FY 2017 4Q 17 3Q 17 4Q 16 FY 2016 3Q 17 4Q 16 Automotive Finance $ 1,220 $ 285 $ 300 $ 298 $ (160) $ (15) $ (13) Insurance 168 80 69 69 11 11 11 Dealer Financial Services $ 1,388 $ 365 $ 369 $ 367 $ (149) $ (4) $ (2)
Slide 32: Funding and Liquidity
Supplemental Funding and Liquidity • Ally Bank funded assets at 82% up 7 pts YoY Growth in Bank Funded Assets • Deposits at 62% of total funding (ex Core OID ($ billions) balance) up 8 pts YoY $163.7 $162.1 $164.3 $164.0 $167.1 • $7.3 billion in domestic term auto ABS transactions FY 17 77% 79% 82%
Slide 33: Corporate and Other
Supplemental Corporate and Other • Corporate and Other includes the impact of centralized Increase/(Decrease) vs. asset and liability management, corporate overhead Key Financials ($ millions) 4Q 17 3Q 17 4Q 16 Net financing revenue $ 60 $ 15 $ 68 allocation activities, the legacy mortgage portfolio
Slide 34: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impacts (1): Baseline vs. Forward Curve 4Q 17 3Q 17 ($ millions) Gradual (2) Instantaneous Gradual (2) Instantaneous -100 bp $ (22) $ 15 $ 12 $ 43 +100 bp $ (18) $ (106) $ (1) $ (62) Stable rate environment n/m $ (14) n/m $ 19 (1) Net fina
Slide 35: Deferred Tax Asset and 4Q 17 ETR Details
Supplemental Deferred Tax Asset and 4Q 17 ETR Details Deferred Tax Asset 4Q 17 3Q 17 (1) 4Q 16 ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Balance Net Operating Loss (Federal) $ 302 $ - $ 302 $ 524 $ 900 Capital Loss (Federal) -
Slide 36: 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 37: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Earnings per Share ("Adjusted EPS") FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ millions) GAAP net income attributable to common shareholders $ 929 $ 1,037 $ (1,282) $ 882 less: Discontinued operations, net of tax (3) 44 (392) (225) add back : Cor
Slide 38: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 Numerator ($ millions) GAAP net income attributable to common shareholders $ 181 $ 282 $ 252 $ 214 $ 248 $ 209 $ 34
Slide 39: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Tangible Book Value per Share ("Adjusted TBVPS") FY 2017 FY 2016 FY 2015 Numerator ($ billions) GAAP shareholder's equity $ 13.5 $ 13.3 $ 13.4 less: Preferred equity - - (0.7) GAAP common shareholder's equity $ 13.5 $ 13.3 $ 12.7 less: Goodwill and
Slide 40: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 Numerator ($ billions) GAAP shareholder's equity $ 13.5 $ 13.6 $ 13.5 $ 13.4 $ 13.3 $ 13.6 $ 13.6 $ 13
Slide 41: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Core Return on Tangible Common Equity ("Core ROTCE") FY 2017 FY 2016 FY 2015 Numerator ($ millions) GAAP net income attributable to common shareholders $ 929 $ 1,037 $ (1,282) less: Discontinued operations, net of tax (3) 44 (392) add b ack: Core OID 71 59
Slide 42: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 Numerator ($ millions) GAAP net income attributable to common shareholders $ 181 $ 282 $ 252 $ 214 $ 248 less: Discontinued operations, net of tax (2) (2)
Slide 43: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Efficiency Ratio FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ millions) Total noninterest expense $ 3,110 $ 2,939 $ 2,761 $ 2,948 less: Rep and warrant expense (0) (6) (13) (10) less: Insurance expense 950 940 879 988 less: Repositioning items - 9
Slide 44: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 Numerator ($ millions) Total noninterest expense $ 769 $ 753 $ 810 $ 778 $ 721 less: Rep and warrant expense (0) (0) (0) (0) (0) less: Insurance expense 213 218 280 239 207 Adjusted
Slide 45: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Regulatory Capital - Basel III transition to fully phased-in ($ billions) 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 Numerator Common equity tier 1 capital (transition) $ 13.2 $ 13.2 $ 13.1 $ 12.9 $ 13.0 DTAs arising from NOL and tax credit carryforward
Slide 46: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures ($ millions) 4Q 17 3Q 17 4Q 16 Core OID & Core OID & Core OID & GAAP Repositioning Non-GAAP (1) GAAP Repositioning Non-GAAP (1) GAAP Repositioning Non-GAAP (1) Items Items Items Consolidated Ally Net financing revenue $ 1,094 $ 19 $ 1,113 $
Slide 47: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Original issue discount amortization expense ANNUAL TREND QUARTERLY TREND ($ millions) FY 2017 FY 2016 FY 2015 FY 2014 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 Core original issue discount (Core OID) amo