Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q2 2023 Earnings Presentation
45 slides from Ally Financial's earnings presentation, Jul 19, 2023
Slide 1: Ally Financial Inc. 2Q 2023 Earnings Review
2Q 2023 Preliminary Results Ally Financial Inc. 2Q 2023 Earnings Review July 19, 2023 Contact Ally Investor Relations at (866) 710-4623 or investor.relations@ally.com 1
Slide 2: Forward-Looking Statements and Additional Information
2Q 2023 Preliminary Results 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 C
Slide 3: GAAP and Core Results: Quarterly
2Q 2023 Preliminary Results GAAP and Core Results: Quarterly ($ millions, except per share data) 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 GAAP net income attributable to common shareholders (NIAC) $ 301 $ 291 $ 251 $ 272 $ 454 (1)(2) Core net income attributable to common shareholders $ 291 $ 250 $ 327 $ 346 $
Slide 4: 2Q 2023 Highlights
2Q 2023 Preliminary Results 2Q 2023 Highlights $0.99 | $0.96 10.8% | 13.9% $2.1B | $2.1B 3.4% | 10.4% GAAP Adj. Return on Core GAAP Adj. Total NIM (1) Est. Retail (ex. OID) EPS EPS(1) Common Equity ROTCE (1) Net Revenue Net Revenue (1) Originated Yield (2) Funding, Liquidity & Capital • Maintaining
Slide 5: Purpose-Driven Culture
2Q 2023 Preliminary Results Purpose-Driven Culture Powered by our “LEAD” core values and “Do it Right” approach L Look Employees Strong enterprise engagement externally Invest in our people score of 84, ranking in the top 10% of companies, +8 vs. and culture to drive financial services benchmark(1)
Slide 6: Managing a Dynamic Environment
2Q 2023 Preliminary Results Managing a Dynamic Environment Positioned for long-term earnings expansion despite volatile market backdrop Interest Rates - Expect near-term NIM compression from higher Fed Funds rate path - Well-established hedging program positioned for ‘higher-for-longer’ rate scenari
Slide 7: Diversified Consumer Deposits Franchise
2Q 2023 Preliminary Results Diversified Consumer Deposits Franchise Stable and growing deposit vintages since the inception of Ally Bank Ally Retail Deposits by Vintage ($ billions) Highlights 2.9M 92% ~$50k 96% Retail deposit of retail deposit Avg. customer Customer customers balances are deposit b
Slide 8: Funding and Liquidity
2Q 2023 Preliminary Results Funding and Liquidity Stable, high-quality deposit funding and strong liquidity position Funding Composition Total Available Liquidity ($ billions) Unsecured Debt Cash and Equivalents FHLB / Other FHLB Unused Pledged Borrowing Capacity Secured Debt Unencumbered Highly Liq
Slide 9: 2Q 2023 Financial Results
2Q 2023 Preliminary Results 2Q 2023 Financial Results Increase / (Decrease) vs. Consolidated Income Statement 2Q 23 1Q 23 2Q 22 1Q 23 2Q 22 ($ millions, except per share data) Net financing revenue $ 1,573 $ 1,602 $ 1,764 $ (29) $ (191) Core OID (1) 12 11 10 0 2 (1) Net financing revenue (ex. Core O
Slide 10: Balance Sheet and Net Interest Margin
2Q 2023 Preliminary Results Balance Sheet and Net Interest Margin 2Q 23 1Q 23 2Q 22 Average Average Average ($ millions) Balance Yield Balance Yield Balance Yield Retail Auto Loans $ 84,097 8.81% $ 83,615 8.49% $ 79,695 6.82% Auto Leases (net of depreciation) 10,110 7.60% 10,435 6.84% 10,615 6.66% C
Slide 11: Net Interest Margin Dynamics
2Q 2023 Preliminary Results Net Interest Margin Dynamics Expect 2023 full-year average NIM of approximately 3.4% • Net interest margin trough in 4Q assuming Fed Funds peak of 5.50% in 2Q ‘23 with no easing in 2023 – End of 2023 Fed Funds ↑ 100bps vs. 3/31 curve, putting incremental pressure on NIM t
Slide 12: Capital
2Q 2023 Preliminary Results Capital • 2Q ‘23 CET1 ratio of 9.3% Capital Ratios and Risk-Weighted Assets • $3.7B of CET1 capital above FRB requirement of 7.0% ($ billions) (Regulatory Minimum + SCB) Total Capital Ratio – 9.0% internal operating target Tier 1 Ratio CET1 Ratio – Preliminary 2023 SCB un
Slide 13: Asset Quality: Key Metrics
2Q 2023 Preliminary Results Asset Quality: Key Metrics Consolidated Net Charge-Offs (NCOs) Net Charge-Off Activity ($ millions) 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23 Retail Auto $ 108 $ 217 $ 347 $ 351 $ 277 Annualized NCO Rate Commercial Auto (1) - - - 4 Mortgage Finance (1) 1 - - - Corporate Finance 26 31
Slide 14: Asset Quality: Coverage and Reserves
2Q 2023 Preliminary Results Asset Quality: Coverage and Reserves Consolidated Coverage Retail Auto Coverage ($ billions) ($ billions) Reserve (%) Reserve (%) Reserve ($) Reserve ($) Note: Coverage rate calculations exclude fair value adjustment for loans in hedge accounting relationships. Note: Cove
Slide 15: Retail Auto Credit Performance
2Q 2023 Preliminary Results Retail Auto Credit Performance Loss performance down seasonally in 2Q, pace of 30+ day DQ normalization moderating • 2Q ‘23 NCOs of 1.3% slightly elevated versus expectations – Elevated delinquencies entering the quarter translated to higher losses in late June – Losses c
Slide 16: Used Vehicle Value Outlook
2Q 2023 Preliminary Results Used Vehicle Value Outlook Used vehicle values forecast to decline 12% in 2H ’23 • 2023 used vehicle value forecast largely unchanged since 1Q ‘23 (full-year down 8% vs. 9% previously) • Expect continued decline in used vehicle values for remainder of the year (down 12% v
Slide 17: Ally Bank: Deposit and Customer Trends
2Q 2023 Preliminary Results Ally Bank: Deposit and Customer Trends #1 2.9M 57 $139B 14+ Largest All-Digital, Ally Bank Consecutive Quarters Retail Deposit Consecutive Years of Direct U.S. Bank(1) Deposit Customers of Customer Growth Balances Retail Deposit Growth • Total deposits of $154.3 billion,
Slide 18: Ally Bank: Leading, Growing, and Diversified
2Q 2023 Preliminary Results Ally Bank: Leading, Growing, and Diversified Organic growth opportunities to deepen customer relationships • Leading, all-digital direct bank with complementary Ally Invest (Brokerage & Wealth) Net Customer Assets ($ in billions) | Acquired: 2Q’16 product suite % of New –
Slide 19: Auto Finance
2Q 2023 Preliminary Results Auto Finance Inc / (Dec) v. • Auto pre-tax income of $501 million Key Financials ($ millions) 2Q 23 1Q 23 2Q 22 Net financing revenue $ 1,349 $ 27 $ 48 – Pre-tax income down YoY, primarily driven by lower net loss Total other revenue 83 6 11 performance in prior year peri
Slide 20: Auto Revenue Diversification
2Q 2023 Preliminary Results Auto Revenue Diversification Significant revenue expansion enabled by scale of auto franchise • Leveraging our strengths and partnership approach to continuously evolve with the industry • Remarketing revenue, driven by SmartAuction, expected to be up over 60% in 2023 com
Slide 21: Consumer Electric Vehicles
2Q 2023 Preliminary Results Consumer Electric Vehicles Well-positioned to remain an industry leader as consumer preferences evolve • Unique scale and dealer engagement levels enable Ally to capitalize as EV adoption increases • Consumer electric vehicle origination volume of $347 million in 2Q ‘23,
Slide 22: Auto Finance: Agile Market Leader
2Q 2023 Preliminary Results Auto Finance: Agile Market Leader #1 #1 #1 #1 Leading Prime Auto Bank Floorplan Bank Retail Auto Dealer Satisfaction Insurance Provider Lender(1) Lender(2) Loan Outstandings(3) J.D. Power Award(4) (F&I, P&C Products) Consumer Applications and Approval Rate Auto Balance Sh
Slide 23: Insurance
2Q 2023 Preliminary Results Insurance Inc / (Dec) v. • Insurance pre-tax income of $8 million and core pre-tax Key Financials ($ millions) 2Q 23 1Q 23 2Q 22 loss of $16 million(1) Premiums, service revenue earned and other income $ 312 $ 3 $ 27 – $312 million of earned premiums, up $27 million YoY V
Slide 24: Corporate Finance
2Q 2023 Preliminary Results Corporate Finance Inc / (Dec) v. • Corporate Finance pre-tax income of $72 million Key Financials ($ millions) 2Q 23 1Q 23 2Q 22 – Net financing revenue up YoY reflecting higher average asset balances Net financing revenue $ 92 $ (11) $ 15 • 2Q charge-off related to legac
Slide 25: Mortgage Finance
2Q 2023 Preliminary Results Mortgage Finance Inc / (Dec) v. • Mortgage pre-tax income of $21 million Key Financials ($ millions) 2Q 23 1Q 23 2Q 22 – Noninterest expense down $17 million YoY, reflecting the benefit Net financing revenue $ 53 $ (1) $ (3) Total other revenue 5 1 1 of partnership DTC or
Slide 26: 2023 Financial Outlook
2Q 2023 Preliminary Results 2023 Financial Outlook Prior Outlook Current Outlook Economic Assumptions: Peak Fed Funds 5.25%* 5.50% YE 2023 Fed Funds 4.50% ↑100bps 5.50% Unemployment Rate (YE ‘23) 4.3% 4.2% * 3/31 forward curve assumed Fed Funds of 5.25% for one month before easing; 6/30 curve assume
Slide 27: Strategic Priorities
2Q 2023 Preliminary Results Strategic Priorities Focused execution on driving long-term value for all stakeholders Ensure culture remains aligned with relentless focus on customers, communities, employees, and shareholders Differentiate as a financial ally for our consumer and commercial customers C
Slide 28: Supplemental
2Q 2023 Preliminary Results Supplemental 28
Slide 29: Results By Segment
Supplemental 2Q 2023 Preliminary Results Results By Segment GAAP to Core pre-tax income Walk Inc / (Dec) v. ($ millions) Segment Detail 2Q 23 1Q 23 2Q 22 1Q 23 2Q 22 Automotive Finance $ 501 $ 442 $ 600 $ 59 $ (99) Insurance 8 92 (122) (84) 130 Dealer Financial Services $ 509 $ 534 $ 478 $ (25) $ 31
Slide 30: Funding Profile Details
Supplemental 2Q 2023 Preliminary Results Funding Profile Details Funding Mix Deposit Mix Unsecured Brokered / FHLB / Other Other Secured Retail CD Deposits MMA/OSA/ Checking Note: Totals may not foot due to rounding. Note: Other includes sweep deposits, mortgage escrow and other deposits. Totals may
Slide 31: Corporate and Other
Supplemental 2Q 2023 Preliminary Results Corporate and Other • Pre-tax loss of $199 million and Core pre-tax loss of ($ millions) Inc / (Dec) v. $187 million(1) Key Financials 2Q 23 1Q 23 1Q 22 Net financing revenue $ 50 $ (47) $ (260) Total other revenue 53 46 (6) – Net financing revenue lower YoY
Slide 32: Interest Rate Risk
Supplemental 2Q 2023 Preliminary Results Interest Rate Risk Net Financing Revenue Sensitivity Analysis (1) ($ millions) 2Q 23 1Q 23 (2) (2) Change in interest rates Gradual Instantaneous Gradual Instantaneous -100 bps $ (109) $ (117) $ (104) $ (117) +100 bps $ 96 $ 121 $ 94 $ 109 Stable rate environ
Slide 33: Deferred Tax Asset
Supplemental 2Q 2023 Preliminary Results Deferred Tax Asset Deferred Tax Asset 2Q 23(1) 1Q 23 ($ millions) Gross DTA Valuation Net DTA Net DTA Balance Allowance Balance Balance Net Operating Loss (Federal) $ 7 $ - $ 7 $ 261 Tax Credit Carryforwards 1,061 (516) 545 512 State/Local Tax Carryforwards 3
Slide 34: Notes on Non-GAAP Financial Measures
Supplemental 2Q 2023 Preliminary Results Notes on Non-GAAP 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 GAAP measures: Accelerated issu
Slide 35: Notes on Non-GAAP Financial Measures
Supplemental 2Q 2023 Preliminary Results Notes on Non-GAAP Financial Measures 6) Adjusted tangible book value per share (Adjusted TBVPS) is a non-GAAP financial measure that reflects the book value of equity attributable to shareholders even if Core OID balance were accelerated immediately through t
Slide 36: Notes on Non-GAAP Financial Measures
Supplemental 2Q 2023 Preliminary Results Notes on Non-GAAP Financial Measures 13) Core return on tangible common equity (Core ROTCE) is a non-GAAP financial measure that management believes is helpful for readers to better understand the ongoing ability of the company to generate returns on its equi
Slide 37: Notes on Other Financial Measures
Supplemental 2Q 2023 Preliminary Results Notes on Other Financial Measures 1) Change in fair value of equity securities impacts the Insurance, Corporate Finance and Corporate and Other segments. The change reflects fair value adjustments to equity securities that are reported at fair value. Manageme
Slide 38: Additional Notes
Supplemental 2Q 2023 Preliminary Results Additional Notes Page – 5 | Purpose-Driven Culture (1) Scores and rankings as measured by a third-party (Glint). (2) Digital interactions represent the number of online and mobile logins year-to-date across consumer auto (excluding SmartAuction, Insurance and
Slide 39: Additional Notes
Supplemental 2Q 2023 Preliminary Results Additional Notes Page – 25 | Mortgage Finance (1) Noninterest expense includes corporate allocations of $24 million in 2Q 2023, $24 million in 1Q 2023, and $30 million in 2Q 2022. (2) 1st lien only. Updated home values derived using a combination of appraisal
Slide 40: GAAP to Core Results: Adjusted EPS
Supplemental 2Q 2023 Preliminary Results GAAP to Core Results: Adjusted EPS Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 Numerator ($ millions) GAAP net income attributable to common shareholders $ 301 $ 29
Slide 41: GAAP to Core Results: Adjusted TBVPS
Supplemental 2Q 2023 Preliminary Results GAAP to Core Results: Adjusted TBVPS Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 Numerator ($ billions) GAAP shareholder's equity $ 13.5 $ 13.4 $ 12.9
Slide 42: GAAP to Core Results: Core ROTCE
Supplemental 2Q 2023 Preliminary Results GAAP to Core Results: Core ROTCE Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 Numerator ($ millions) GAAP net income attributable to common shareholders $ 30
Slide 43: GAAP to Core Results: Adjusted Efficiency Ratio
Supplemental 2Q 2023 Preliminary Results GAAP to Core Results: Adjusted Efficiency Ratio Adjusted Efficiency Ratio QUARTERLY TREND 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 Numerator ($ millions) GAAP noninterest expense $ 1,249 $ 1,266 $ 1,266 $ 1,161 $ 1,138 Insurance expense (358) (315) (286) (290) (300) Rep
Slide 44: Non-GAAP Reconciliation: Core Income
Supplemental 2Q 2023 Preliminary Results Non-GAAP Reconciliation: Core Income ($ millions) 2Q 23 1Q 23 2Q 22 Change in fair Change in fair Change in fair GAAP Core OID value of equity Repositioning Non-GAAP (1) GAAP Core OID value of equity Repositioning Non-GAAP (1) GAAP Core OID value of equity Re
Slide 45: Non-GAAP Reconciliations
Supplemental 2Q 2023 Preliminary Results Non-GAAP Reconciliations Net Financing Revenue (ex. Core OID) QUARTERLY TREND ($ millions) 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 GAAP Net Financing Revenue [x] $ 1,573 $ 1,602 $ 1,674 $ 1,719 $ 1,764 $ 1,693 $ 1,654 $ 1