Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q2 2016 Earnings Presentation
32 slides from Ally Financial's earnings presentation, Jul 26, 2016
Slide 1: Ally Financial Inc. 2Q 2016 Earnings Review
Ally Financial Inc. 2Q 2016 Earnings Review July 26, 2016 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 The following should be read in conjunction with the financial statements, notes and other information contained in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. This information is pr
Slide 3: GAAP and Core Results
GAAP and Core Results QUARTERLY TREND 2Q '16 1Q '16 4Q '15 3Q '15 2Q '15 GAAP net income available to common ("NIAC") $ 345 $ 235 $ (953) $ 230 $ (1,069) (1)(2) Core net income available to common $ 263 $ 253 $ 249 $ 244 $ 224 GAAP earnings per common share ("EPS")(diluted, NIAC) $ 0.71 $ 0.49 $ (1.
Slide 4: Second Quarter Highlights
Second Quarter Highlights P• Solid underlying fundamentals − Adjusted EPS(1) of $0.54, up 17% YoY − Auto Finance pre-tax income up 14% YoY − Estimated risk-adjusted retail auto yield(2) for 2Q 16 originations up 44 bps YoY − Continued strong lease and credit performance – consolidated annualized NCO
Slide 5: Initiating Common Share Distributions
Initiating Common Share Distributions • Plan to return significant capital to shareholders to optimize returns and capital deployment • Consistent with the 2016 Capital Plan, Ally’s Board approved the following: • Cash dividend of $0.08 per share of Ally common stock in 3Q 16: – Payable on August 15
Slide 6: CCAR Results
CCAR Results • Strong capital levels support severely adverse stress losses • Implied FRB Stress annualized net charge-off rate (2) suggests approximately $0.9 - $1.0 billion of incremental annual retail auto losses above Ally’s trailing 12 months of net charge-offs • For perspective: – Last twelve
Slide 7: Second Quarter Key Financial Metrics
Second Quarter Key Financial Metrics • Adjusted EPS(1) up 17% YoY driven by strong operating performance and lower preferred dividends – Excluding $0.04 per share impact of higher weather losses (up $29 million YoY), Adjusted EPS (1) up 25% YoY • Adjusted Tangible Book Value per Share(1) up $0.49 Qo
Slide 8: Second Quarter Financial Results
Second Quarter Financial Results Increase / (Decrease) vs. ($ millions except per share data) 2Q 16 1Q 16 2Q 15 1Q 16 2Q 15 (1) Net financing revenue (excld OID) $ 998 $ 964 $ 927 $ 34 $ 71 OID expense (14) (13) (11) (1) (3) Net financing revenue (as reported) 984 951 916 33 68 Total other revenue 3
Slide 9: Net Interest Margin
Net Interest Margin • Net Interest Margin (“NIM”) of 2.68% up 13 bps YoY driven by higher retail auto and lease yields • NIM (excluding OID) (1) of 2.72% up 14 bps YoY and 9 bps QoQ – Continue to maintain balanced sensitivity to interest rates (see page 24) – Long-term opportunity for continued shif
Slide 10: Deposits
Deposits • Deposit business showing strong momentum Stable, consistent growth of retail deposits surpassing $61 billion of retail deposits Ally Bank Deposit Levels – $2.3 billion of retail deposit growth QoQ and $9.5 ($ billions) $70.0 $72.5 $66.2 billion YoY $70 $61.6 $63.7 $11.3 $11.0 $60 $10.2 $1
Slide 11: Capital
Capital • Common Equity Tier 1 (“CET1”) (1) capital up QoQ driven by consistent profitability and DTA Capital Ratios and Risk-Weighted Assets utilization 12.6% 12.9% 13.0% 12.8% • Total Capital and Tier 1 Capital lower QoQ due to 11.7% 11.9% 12.5% 11.5% 11.1% 11.1% redemption of remaining Series A p
Slide 12: Asset Quality
Asset Quality Consolidated Net Charge-Offs Provision Expense 0.72% ($ millions) 0.68% 0.61% 0.64% 0.60% 0.61% Provision Expense 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 0.54% Retail Auto $ 158 $ 152 $ 200 $ 229 $ 207 $ 168 0.39% Commercial Auto (31) (20) 1 7 2 2 Mortgage Finance 2 4 3 (2) 3 - 244% Corpor
Slide 13: Low Loss Balance Sheet
Low Loss Balance Sheet • Low loss balance sheet with 2Q 16 consolidated annualized net charge-offs of 54 bps, down 10 bps QoQ and up 15 bps YoY • Loan portfolio consists of largely prime, short duration, secured consumer and commercial loans Losses by Asset Class All (1) (1) secured Balance $B NCO %
Slide 14: Auto Finance – Results
Auto Finance – Results • Auto Finance reported pre-tax income of $426 million in Increase/(Decrease) vs. 2Q, up $53 million YoY and up $89 million QoQ Key Financials ($ millions) 2Q 16 1Q 16 2Q 15 Net financing revenue $ 929 $ 33 $ 79 – Net financing revenue higher YoY due to successful Total other
Slide 15: Auto Finance – Key Metrics
Auto Finance – Key Metrics Consumer Originations Origination Mix ($ billions; % of $ originations) (% of $ originations) $10.8 $11.1 36% 37% 35% 37% $9.8 45% 43% $9.3 $9.0 $9.4 32% 32% 9% 28% 17% 9% 11% 33% 37% 9% 9% 37% 20% 24% 24% 26% 28% 48% 49% 49% 26% 42% 45% 46% 52% 45% 45% 40% 37% 35% 5% 6% 7
Slide 16: Insurance
Insurance • Pre-tax loss of $18 million, down $33 million YoY and Increase/(Decrease) vs. $68 million QoQ Key Financials ($ millions) 2Q 16 1Q 16 2Q 15 Premiums, service revenue earned and other $ 241 $ 7 $ - – Higher weather losses from severe hail storms Losses and loss adjustment expenses 145 72
Slide 17: Mortgage Finance
Mortgage Finance • Pre-tax income of $9 million, up $12 million YoY and up $7 million QoQ Increase/(Decrease) vs. Key Financials ($ millions) 2Q 16 1Q 16 2Q 15 – Higher net financing revenue driven by asset balance Total net revenue $ 26 $ 6 $ 15 Provision for loan losses - (3) (4) growth from bulk
Slide 18: Corporate Finance
Corporate Finance • Pre-tax income of $14 million up $4 million YoY and up Increase/(Decrease) vs. $3 million from the prior quarter Key Financials ($ millions) 2Q 16 1Q 16 2Q 15 Net financing revenue $ 29 $ 1 $ 7 – Net financing revenue up QoQ and YoY driven by Total other revenue 4 (2) (2) continu
Slide 19: Conclusion
Conclusion “Self-help” EPS growth materializing • Adjusted EPS (1) up 17% YoY • Eliminated future preferred dividends • Long runway for deposit growth and lower capital markets funding • Share repurchase non-objection provides greater confidence in 2017 EPS growth • Thoughtful and gradual product ex
Slide 20: Supplemental Charts
Supplemental Charts
Slide 21: Results by Segment
Supplemental Results by Segment Pre-Tax Income Increase/(Decrease) vs. ($ millions) 2Q 16 1Q 16 2Q 15 1Q 16 2Q 15 Automotive Finance $ 426 $ 337 $ 373 $ 89 $ 53 Insurance (18) 50 15 (68) (33) Dealer Financial Services $ 408 $ 387 $ 388 $ 21 $ 20 Mortgage Finance 9 2 (3) 7 12 Corporate Finance 14 11
Slide 22: 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) 2Q 16 1Q 16 2Q 15 allocation activities and the legacy mortgage portfolio Net financing revenue (deficit) $
Slide 23: Funding and Liquidity
Supplemental Funding and Liquidity • Strong total liquidity levels at $17.6 billion in 2Q 16 Growth in Bank Funded Assets • Bank funding now at 73% up 5% YoY ($ billions) • Secured funding transactions of $1.6 billion in 2Q 16 $156.3 $155.9 $158.6 $156.5 $157.9 – $1.1 billion whole loan sales – $0.5
Slide 24: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impact(1) vs. Forward Curve 2Q16 1Q16 Ally Modeled 50% Deposit Ally Modeled 50% Deposit $ million Scenario(2) Pass-Through Scenario(2) Pass-Through +100 bp Instantaneous $ (18) $ 89 $ (29) $ 73 +100 bp Gradual (over 12 months) $ 0 $ 40 $ (
Slide 25: Deferred Tax Asset
Supplemental Deferred Tax Asset Deferred Tax Asset 2Q 16 (1) 1Q 16 (1) ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Net Operating Loss (Federal) $ 892 $ - $ 892 $ 935 Capital Loss (Federal) 57 (57) - - Tax Credit Carryforwards 1,981 (493) 1,488
Slide 26: 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 27: GAAP to Core Results
Supplemental GAAP to Core Results Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 2Q '16 1Q '16 4Q '15 3Q '15 2Q '15 Numerator ($ millions) GAAP net income available to common shareholders $ 345 $ 235 $ (953) $ 230 $ (1,069) less: Disc Ops, net of tax (3) (3) 13 5 (13) add back : Origin
Slide 28: GAAP to Core Results
Supplemental GAAP to Core Results Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 2Q '16 1Q '16 4Q '15 3Q '15 2Q '15 Numerator ($ billions) GAAP shareholder's equity $ 13.6 $ 13.8 $ 13.4 $ 14.6 $ 14.3 less: Preferred equity - (0.7) (0.7) (0.8) (0.8) GAAP Common shareholder'
Slide 29: GAAP to Core Results
Supplemental GAAP to Core Results Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 2Q '16 1Q '16 4Q '15 3Q '15 2Q '15 Numerator ($ millions) GAAP net income available to common shareholders $ 345 $ 235 $ (953) $ 230 $ (1,069) less: Disc Ops, net of tax (3) (3) 13 5 (13) add b ack
Slide 30: GAAP to Core Results
Supplemental GAAP to Core Results Adjusted Efficiency Ratio QUARTERLY TREND 2Q '16 1Q '16 4Q '15 3Q '15 2Q '15 Numerator ($ millions) Total noninterest expense $ 773 $ 710 $ 668 $ 674 $ 724 less: Rep and warrant expense (3) (1) (2) (3) (9) less: Insurance expense 293 218 201 209 267 less: Reposition
Slide 31: 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) 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 Numerator Common equity tier 1 capital (transition) $ 12.8 $ 12.7 $ 12.5 $ 13.4 $ 13.2 DTAs arising from NOL and tax credit carryforward
Slide 32: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures $ in millions 2Q 16 1Q 16 2Q 15 OID & OID & OID & GAAP Repositioning Non-GAAP (1) GAAP Repositioning Non-GAAP (1) GAAP Repositioning Non-GAAP (1) Items Items Items Consolidated Ally Net financing revenue $ 984 $ 14 $ 998 $ 951 $ 13 $ 964 $