Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q3 2017 Earnings Presentation
34 slides from Ally Financial's earnings presentation, Oct 25, 2017
Slide 1: Ally Financial Inc. 3Q 2017 Earnings Review
Ally Financial Inc. 3Q 2017 Earnings Review October 25, 2017 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
GAAP and Core Results QUARTERLY TREND 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 GAAP net income available to common ("NIAC") $ 282 $ 252 $ 214 $ 248 $ 209 (1)(2) Core net income available to common $ 292 $ 265 $ 224 $ 256 $ 271 GAAP earnings per common share ("EPS")(diluted, NIAC) $ 0.63 $ 0.55 $ 0.46 $ 0.52 $
Slide 4: Third Quarter Highlights
Third Quarter Highlights Adjusted EPS(1) of 65 cents – up 16% YoY Adjusted total net revenue(1) of $1.48 billion – up 6% YoY Retail auto net charge-off rate of 1.45% 3Q auto lease yield of 6.9% and 3Q estimated retail auto originated yield(2) of 6.3% Record quarterly retail deposit growth
Slide 5: Regulatory Normalization Complete
Regulatory Normalization Complete Multi-year process to normalize regulatory and capital framework March – Non-objection to 2015 CCAR – approval to redeem $2.3 billion preferred stock 2015 May – Deposit restrictions removed November – Mid-cycle ability to address remaining $1.3 billion Series
Slide 6: Benefits of Bank Regulatory Normalization
Benefits of Bank Regulatory Normalization Utilization of bank funding keeps strong earnings growth trajectory on track Creates liquidity at the parent to address unsecured debt maturities and bring down capital markets funding − Retail auto loans will amortize at the parent with new loans largely
Slide 7: Core Metric Trend
Core Metric Trend Adjusted Earnings per Share(1) Adjusted Total Net Revenue(2) ($ millio ns) $0.65 $1,472 $1,480 $0.58 $0.56 $1,399 $0.53 $0.54 $0.54 $1,383 $1,391 $388 $381 $0.52 $0.52 $0.52 $1,372 $0.51 $1,353 $0.48 $1,344 $0.46 $1,313 $1,311 $1,301 $388 $1,295 $374 $392 $396 $0.40 $358 $332 $380
Slide 8: Hurricane Impacts
Hurricane Impacts • Reinsurance agreement substantially limited financial exposure of Hurricanes Harvey and Irma Dealer − Approximately $23 million in claims from Harvey and $3 million from Irma Floorplan − 3Q losses in excess of $19 million were covered by reinsurance Insurance • Dealer actions sub
Slide 9: Third Quarter Financial Results
Third Quarter Financial Results Increase / (Decrease) vs. ($ millions except per share data) 3Q 17 2Q 17 3Q 16 2Q 17 3Q 16 Net financing revenue (excluding OID) (1) $ 1,099 $ 1,084 $ 1,011 $ 15 $ 88 OID expense (18) (17) (15) (1) (3) Net financing revenue (as reported) 1,081 1,067 996 14 85 Other re
Slide 10: Net Financing Revenue
Net Financing Revenue • Net financing revenue (excluding OID)(1) of $1,099 million − Up $88 million YoY driven by asset growth and margin expansion • Net Interest Margin (“NIM”) of 2.74% • NIM (excluding OID)(1) of 2.78% up 5 bps YoY Net Interest Margin ($ millions) 3Q 17 2Q 17 3Q 16 Average Average
Slide 11: Deposits
Deposits • Record quarterly retail deposit growth – retail deposits Stable, consistent growth of retail deposits up $3.8 billion QoQ and $11 billion YoY Deposit Levels (EOP) • Total deposits at $90.1 billion - up $14.4 billion or 19% ($ billions) $90.1 YoY $79.0 $84.5 $86.2 $75.7 $15.2 $14.5 $15.1 $
Slide 12: Key Deposit Trends
Key Deposit Trends Ally Bank outpacing direct bank market share Stable deposit balances by vintage Ally Retail Deposit Balances by Vintage ($ millions) $75,000 7th 7th 15.1% 14.3% 8th 8th 13.4% 12.8% $60,000 9th 9th 11.9% $45,000 9.8% 11th 8.3% 8.0% 7.2% 7.6% 7.0% 6.9% 12th $30,000 6.2% 6.6% 6.1% 5.
Slide 13: Capital
Capital • Preliminary fully phased-in Basel III CET1 ratio of 9.6% Capital Ratios(1) and Risk-Weighted Assets • Risk-weighted assets relatively flat YoY while net 12.8% 13.1% 12.7% 12.5% 12.7% financing revenue has steadily grown 11.1% 11.1% 11.1% 11.4% 10.9% 9.3% 9.3% 9.4% 9.6% 9.1% • 3Q 17 share r
Slide 14: Asset Quality
Asset Quality Consolidated Net Charge-Offs Provision Expense ($ millions) 0.88% 0.86% 0.85% 0.75% Provision Expense 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 0.72% 0.64% 0.66% Retail Auto $ 168 $ 269 $ 275 $ 267 $ 260 $ 314 0.54% Commercial Auto 2 1 - 1 6 (2) Mortgage Finance - 1 (8) 1 1 4 Corporate Finan
Slide 15: Auto Finance – Results
Auto Finance – Results • Auto Finance reported pre-tax income of $300 million in Increase/(Decrease) vs. 3Q, down $19 million YoY and down $47 million QoQ Key Financials ($ millions) 3Q 17 2Q 17 3Q 16 Net financing revenue $ 950 $ 18 $ 17 – Net financing revenue up YoY and QoQ driven by Total other
Slide 16: Auto Finance – Key Metrics
Auto Finance – Key Metrics Consumer Originations Origination Mix ($ billions; % of $ originations) (% of $ originations) $9.4 $9.3 $8.9 $8.6 43% 40% 41% 47% 45% $8.2 $8.1 48% 37% 36% 36% 40% 41% 11% 8% 40% 9% 10% 13% 11% 28% 29% 27% 28% 30% 28% 48% 49% 50% 44% 42% 40% 35% 35% 37% 32% 30% 32% 2Q 16 3
Slide 17: Insurance
Insurance • Pre-tax income of $69 million up $13 million YoY and up Increase/(Decrease) vs. $90 million QoQ Key Financials ($ millions) 3Q 17 2Q 17 3Q 16 Premiums, service revenue earned and other $ 255 $ 23 $ 13 – Earned premiums up YoY driven primarily by higher Losses and loss adjustment expenses
Slide 18: Corporate Finance
Corporate Finance • Pre-tax income of $22 million, up $7 million YoY and down $13 million QoQ Increase/(Decrease) vs. Key Financials ($ millions) 3Q 17 2Q 17 3Q 16 – Net financing revenue up YoY driven by strong loan Net financing revenue $ 39 $ (9) $ 9 growth and down QoQ from interest income recov
Slide 19: Mortgage Finance
Mortgage Finance • Pre-tax income of $2 million, down $6 million YoY and Increase/(Decrease) vs. down $5 million QoQ Key Financials ($ millions) 3Q 17 2Q 17 3Q 16 Net financing revenue $ 32 $ - $ 7 – Higher net financing revenue YoY driven by asset Total other revenue 2 1 2 balance growth Total net
Slide 20: Plan for Driving Strong Shareholder Returns – On Track
Plan for Driving Strong Shareholder Returns – On Track Continue to optimize retail auto returns to ensure strong profitability through the cycle Demonstrate retail auto net charge-offs are contained within a range Grow and solidify customer relationships to position for the long-term Deliver
Slide 21: Supplemental Charts
Supplemental Charts
Slide 22: Results by Segment
Supplemental Results by Segment Pre-Tax Income Increase/(Decrease) vs. ($ millions) 3Q 17 2Q 17 3Q 16 Automotive Finance $ 300 $ (47) $ (19) Insurance 69 90 13 Dealer Financial Services $ 369 $ 43 $ (6) Mortgage Finance 2 (5) (6) Corporate Finance 22 (13) 7 Corporate and Other 2 (6) 9 Pre-tax income
Slide 23: Funding and Liquidity
Supplemental Funding and Liquidity • Ally Bank funded assets at 79% up 6 pts YoY Growth in Bank Funded Assets • Deposits at 61% of total funding (ex OID) up 7 pts YoY ($ billions) $157.4 $163.7 $162.1 $164.3 $164.0 • New secured funding in 3Q 17 – $1.0 billion Ally Bank retail auto securitization 75
Slide 24: Corporate and Other
Supplemental Corporate and Other • Corporate and Other includes the impact of centralized Increase/(Decrease) vs. asset and liability management, corporate overhead Key Financials ($ millions) 3Q 17 2Q 17 3Q 16 Net financing revenue $ 45 $ 4 $ 51 allocation activities, the legacy mortgage portfolio
Slide 25: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impact(1) vs. Forward Curve 3Q 17 2Q 17 Ally Modeled 50% Deposit Ally Modeled 50% Deposit ($ millions) Scenario(2) Pass-Through Scenario(2) Pass-Through +100 bp Gradual (over 12 months) $ (1) $ 51 $ (12) $ 37 +100 bp Instantaneous $ (62) $
Slide 26: Deferred Tax Asset
Supplemental Deferred Tax Asset Deferred Tax Asset 3Q 17 (1) 2Q 17 (1) 3Q 16 (1) ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Balance Net Operating Loss (Federal) $ 524 $ - $ 524 $ 576 $ 806 Capital Loss (Federal) - - - - - Tax Cr
Slide 27: 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 28: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 3Q 17 2Q17 1Q17 4Q16 3Q16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 3Q 14 Numerator ($ millions) GAAP net income available to common shareholders $ 282 $ 252 $ 214 $ 248 $ 209 $ 345 $ 235 $ (95
Slide 29: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 3Q 17 2Q17 1Q17 4Q16 3Q16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 3Q 14 Numerator ($ billions) GAAP shareholder's equity $ 13.6 $ 13.5 $ 13.4 $ 13.3 $ 13.6 $ 13.6 $ 13.8 $ 13.4 $
Slide 30: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 3Q 17 2Q17 1Q17 4Q16 3Q16 Numerator ($ millions) GAAP net income available to common shareholders $ 282 $ 252 $ 214 $ 248 $ 209 less: Disc Ops, net of tax (2) 2 (1) (2) 52 add b ack: Co
Slide 31: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 3Q 17 2Q17 1Q17 4Q16 3Q16 Numerator ($ millions) Total noninterest expense $ 753 $ 810 $ 778 $ 721 $ 735 less: Rep and warrant expense (0) (0) (0) (0) (2) less: Insurance expense 218 280 239 207 222 Adjusted noni
Slide 32: 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) 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 Numerator Common equity tier 1 capital (transition) $ 13.2 $ 13.1 $ 12.9 $ 13.0 $ 12.9 DTAs arising from NOL and tax credit carryforward
Slide 33: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures ($ millions) 3Q 17 2Q 17 3Q 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 $ 1,081 $ 18 $ 1,099 $
Slide 34: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Original Issue Discount Expense QUARTERLY TREND ($ millions) 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 3Q 14 Core original issue discount expense (1) $ 18 $ 17 $ 16 $ 15 $ 15 $ 14 $ 13 $ 12 $ 11 $ 11 $ 10 $ 36