Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q4 2016 Earnings Presentation
44 slides from Ally Financial's earnings presentation, Jan 31, 2017
Slide 1: Ally Financial Inc. 4Q 2016 Earnings Review
Ally Financial Inc. 4Q 2016 Earnings Review January 31, 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 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 - Annual
GAAP and Core Results - Annual FY 2016 FY 2015 FY 2014 GAAP net income available to common ("NIAC") $ 1,037 $ (1,282) $ 882 (1)(2) Core net income available to common $ 1,043 $ 967 $ 812 GAAP earnings per common share ("EPS")(diluted, NIAC) $ 2.15 $ (2.66) $ 1.83 (1)(3) Adjusted EPS $ 2.16 $ 2.00 $
Slide 4: GAAP and Core Results - Quarterly
GAAP and Core Results - Quarterly QUARTERLY TREND 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 GAAP net income available to common ("NIAC") $ 248 $ 209 $ 345 $ 235 $ (953) (1)(2) Core net income available to common $ 256 $ 271 $ 263 $ 253 $ 249 GAAP earnings per common share ("EPS")(diluted, NIAC) $ 0.52 $ 0.43 $
Slide 5: 2016 Highlights
2016 Highlights 8% Adjusted EPS annual growth (1) Improved profitability on retail auto portfolio – risk-adjusted margin up $141 million YoY (2) Record deposit growth – total deposits up $12.5 billion YoY Initiated common dividend and share buyback program Enhanced Auto Finance offerings –
Slide 6: Positioned for Strong Future Adjusted EPS Growth
Positioned for Strong Future Adjusted EPS(1) Growth 2017 2018 - 2019 Net Financing Lease decline more than offset by loan $5 billion +/- in 2019 driven by deposit Revenue net interest income growth growth and wholesale funding reduction Fairly flat year-over-year as business Growth from business exp
Slide 7: Full Year and Fourth Quarter Financial Results
Full Year and Fourth Quarter Financial Results Increase / (Decrease) vs. ($ millions except per share data) FY 2016 FY 2015 4Q 16 3Q 16 4Q 15 FY 2015 3Q 16 4Q 15 Net financing revenue (excld OID) (1) $ 3,964 $ 3,764 $ 991 $ 1,011 $ 995 $ 200 $ (19) $ (4) OID expense (57) (45) (15) (15) (12) (12) (1)
Slide 8: Adjusted EPS Growth
Adjusted EPS(1) Growth Strong deposit growth and preferred dividend savings driving solid EPS growth Retail auto loan growth offsetting significant lease revenue decline $2.16 $2.00 $1.68 2014 2015 2016 (1) Represents a non-GAAP financial measure. See page 36 for calculation methodology and details.
Slide 9: Total Net Revenue (Adj.)
Total Net Revenue (Adj.)(1) Consistent total net revenue (adj.)(1) growth ($ millions) + $513 $5,498 $5,262 $4,985 $3,964 $3,764 $3,547 $1,438 $1,498 $1,534 2014 2015 2016 (1) (1) Other Revenue Net Financing Revenue (excld OID) (1) Represents a non-GAAP financial measure. Excludes OID from Net Finan
Slide 10: Net Financing Revenue (excld OID)
Net Financing Revenue (excld OID)(1) Deposit and retail loan growth offsetting lease decline ($ millions) $3,964 $3,764 $3,547 $2,902 $3,230 $2,580 $967 $862 $733 2014 2015 2016 (1) Lease Net Financing Revenue Net Financing Revenue (excld Lease and OID) (1) Represents a non-GAAP financial measure. E
Slide 11: Other Revenue (Adj.)
Other Revenue (Adj.)(1) Consistent noninterest income supported by Insurance and SmartAuction ($ millions) $1,534 $1,498 $1,438 $155 $185 $181 $79 $200 $128 $170 $112 $103 $101 $64 $31 $45 $31 $986 $948 $952 2014 2015 2016 (2) Insurance (excld Investment gains) TradeKing Auto servicing fees SmartAuc
Slide 12: Provision Expense
Provision Expense Higher provision expense driven by deliberate mix shift and retail loan growth ($ millions) $917 $20 $97 $707 $130 $147 $457 $801 $609 $537 ($33) ($228) ~$130 due to transfer of TDR loans to held- for-sale 2014 2015 2016 Net losses Loan growth (adjusted for impact of loan sales) Ch
Slide 13: Noninterest Expense
Noninterest Expense Maintaining expense efficiency while investing in growth initiatives ($ millions) $2,948 $2,939 51% $2,761 $59 $784 $731 $671 45% 45% $2,165 $2,090 $2,149 2014 2015 2016 (2) (3) (1) Other noninterest expense Insurance expenses Acquisitions / New Products Adjusted Efficiency Ratio
Slide 14: Earning Asset Growth
Earning Asset Growth Asset growth driven by retail and commercial auto growth partially offset by lease ($ billions; end of period balances) $156.1 $151.4 $143.2 $65.8 $64.2 $58.1 $11.5 $16.3 $19.5 $38.9 $34.9 $34.0 $23.7 $25.8 $22.3 $2.6 $3.2 $1.8 $7.5 $9.8 $11.1 2014 2015 2016 Mortgage Corporate F
Slide 15: Deposit Growth
Deposit Growth Deposit growth momentum supported by both new and existing customer expansion (End of period balances) +$12.5B | Total Deposits +$1.4B Brokered/Other $79.0B +$3.5B Existing Retail Customers +$11.1B Retail Deposit Growth +$7.7B New Retail Customers +$8.3B | Total Deposits +$0.8B Broker
Slide 16: Brand Awareness
Brand Awareness Marketing efforts driving strong brand awareness and customer growth Ally Bank Retail Deposit Customers “Do It Right” (thousands) marketing campaign Ally Lucky Penny Sweepstakes 57% Ally branded credit card launch 1,217 1,051 909 48% 45% 2014 2015 2016 Brand Awareness Retail Customer
Slide 17: Net Interest Margin
Net Interest Margin • Full year Net Interest Margin (“NIM”) of 2.63% up 6 bps YoY • 4Q 16 NIM declined due to lower lease yields and higher commercial auto balances − Retail auto loan yield increased approximately 40 bps YoY Net Interest Margin ($ millions) FY 2016 FY 2015 4Q 16 3Q 16 4Q 15 Average
Slide 18: Capital
Capital Capital Ratios(1) and Risk-Weighted Assets Deferred Tax Asset Utilization ($ millions) 13.0% 12.8% 12.7% 12.5% 12.5% 11.5% $1,359 11.1% 11.1% 11.1% 10.9% 9.2% 9.3% 9.3% 9.1% 8.7% $1,130 $1,065 $980 $976 $948 $136 $139 $826 $134 $134 $136 $777 $667 $683 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 4Q 15 1Q
Slide 19: Asset Quality
Asset Quality Consolidated Net Charge-Offs Provision Expense ($ millions) 0.88% 0.75% Provision Expense 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 0.72% 0.61% 0.61% 0.64% Retail Auto $ 200 $ 229 $ 207 $ 168 $ 269 $ 275 0.54% Commercial Auto 1 7 2 2 1 - 0.39% Mortgage Finance 3 (2) 3 - 1 (8) 244% Corporate
Slide 20: Auto Finance – Results
Auto Finance – Results • Auto Finance reported pre-tax income of $298 million in Increase/(Decrease) vs. 4Q, down $35 million YoY and down $21 million QoQ Key Financials ($ millions) 4Q 16 3Q 16 4Q 15 Net financing revenue $ 907 $ (26) $ 7 – Net financing revenue higher YoY due to asset growth Total
Slide 21: Auto Finance – Key Metrics
Auto Finance – Key Metrics Consumer Originations Origination Mix ($ billions; % of $ originations) (% of $ originations) $11.1 35% 37% 45% 43% 40% 41% $9.3 $9.0 $9.4 $9.3 32% $8.2 9% 11% 11% 8% 33% 37% 36% 9% 9% 37% 24% 36% 26% 29% 49% 49% 26% 28% 27% 46% 48% 50% 45% 45% 40% 37% 35% 35% 37% 7% 1% 1%
Slide 22: Used Vehicle Prices
Used Vehicle Prices Lease portfolio continues to perform well as used vehicle prices decline as expected Used Vehicle Indices NADA Index Change YoY 130 125.7 124.9 124.7 0.4% -0.1% 123.9 120 122.6 0.0% -1.6% 110 114.3 -3.6% -3.8% -3.5% 100 -5.9% Manheim NADA Note: Quarterly change based on 3-month a
Slide 23: Insurance
Insurance • Pre-tax income of $69 million, down $9 million YoY and Increase/(Decrease) vs. up $13 million QoQ Key Financials ($ millions) 4Q 16 3Q 16 4Q 15 Premiums, service revenue earned and other $ 244 $ 2 $ 6 – Lower investment gains YoY and QoQ Losses and loss adjustment expenses 55 (14) 1 Acqu
Slide 24: Mortgage Finance
Mortgage Finance • Pre-tax income of $15 million, up $6 million YoY and up Increase/(Decrease) vs. $7 million QoQ Key Financials ($ millions) 4Q 16 3Q 16 4Q 15 Total net revenue $ 26 $ 1 $ 8 – Higher net financing revenue YoY driven by asset Provision for loan losses (8) (9) (6) balance growth from
Slide 25: Corporate Finance
Corporate Finance • Pre-tax income of $31 million, up $22 million YoY and $16 million QoQ Increase/(Decrease) vs. Key Financials ($ millions) 4Q 16 3Q 16 4Q 15 – Net financing revenue up YoY driven by strong loan Net financing revenue $ 34 $ 4 $ 9 growth Total other revenue 12 8 9 Total net revenue
Slide 26: 2017 Priorities
2017 Priorities Positioned for continued strong growth in 2017 Continue strong deposit and customer growth momentum Demonstrate growth path for direct mortgage and wealth management Continue to optimize auto finance business and position for future Maintain discipline on credit and expense e
Slide 27: Supplemental Charts
Supplemental Charts
Slide 28: Deposits
Supplemental Deposits • Continued strong retail deposit growth in 4Q 16 Stable, consistent growth of retail deposits – $2.7 billion of retail deposit growth QoQ Ally Bank Deposit Levels (EOP) • ($ billions) Full year 2016 retail deposit growth of $11.1 billion $78.8 $72.5 $75.4 • Average retail port
Slide 29: Results by Segment
Supplemental Results by Segment Pre-Tax Income Increase/(Decrease) vs. ($ millions) FY 2016 4Q 16 FY 2015 3Q 16 4Q 15 Automotive Finance $ 1,380 $ 298 $ 45 $ (21) $ (35) Insurance 157 69 (54) 13 (9) Dealer Financial Services $ 1,537 $ 367 $ (9) $ (8) $ (44) Mortgage Finance 34 15 23 7 6 Corporate Fi
Slide 30: Funding and Liquidity
Supplemental Funding and Liquidity • Bank funding at 75% up 5% YoY • Deposits at 54% of total funding up 7% YoY Growth in Bank Funded Assets • New secured and unsecured funding and liquidity in 2016 ($ billions) $158.6 $157.9 $157.4 $163.7 $156.5 – Executed $10.8 billion in new funding $5.1 billio
Slide 31: Corporate and Other
Supplemental Corporate and Other • Corporate and Other includes the impact of centralized Increase/(Decrease) vs. asset and liability management, corporate overhead Key Financials ($ millions) 4Q 16 3Q 16 4Q 15 Net financing revenue (loss) $ (8) $ (2) $ (33) allocation activities, the legacy mortgag
Slide 32: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impact(1) vs. Forward Curve 4Q 16 3Q 16 Ally Modeled 50% Deposit Ally Modeled 50% Deposit $ million Scenario(2) Pass-Through Scenario(2) Pass-Through +100 bp Instantaneous $ (62) $ 77 $ 17 $ 133 +100 bp Gradual (over 12 months) $ (2) $ 50
Slide 33: Deferred Tax Asset
Supplemental Deferred Tax Asset Deferred Tax Asset 4Q 16 3Q 16 (1) ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Net Operating Loss (Federal) $ 900 $ - $ 900 $ 806 Capital Loss (Federal) 36 (36) - - Tax Credit Carryforwards 1,987 (485) 1,502 1,4
Slide 34: 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 35: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 Numerator ($ millions) GAAP net income available to common shareholders $ 248 $ 209 $ 345 $ 235 $ (953) less: Disc Ops, net of tax (2) 52 (3) (3) 13 add back : Ori
Slide 36: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Earnings per Share ("Adjusted EPS") FY 2016 FY 2015 FY 2014 Numerator ($ millions) GAAP net income available to common shareholders $ 1,037 $ (1,282) $ 882 less: Disc Ops, net of tax 44 (392) (225) add back : Original issue discount expense ("OID e
Slide 37: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 Numerator ($ billions) GAAP shareholder's equity $ 13.3 $ 13.6 $ 13.6 $ 13.8 $ 13.4 less: Preferred equity - - - (0.7) (0.7) GAAP Common shareholder's
Slide 38: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Tangible Book Value per Share ("Adjusted TBVPS") FY 2016 FY 2015 FY 2014 Numerator ($ billions) GAAP shareholder's equity $ 13.3 $ 13.4 $ 15.4 less: Preferred equity - (0.7) (1.3) GAAP Common shareholder's equity $ 13.3 $ 12.7 $ 14.1 less: Goodwill
Slide 39: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 Numerator ($ millions) GAAP net income available to common shareholders $ 248 $ 209 $ 345 $ 235 $ (953) less: Disc Ops, net of tax (2) 52 (3) (3) 13 add b
Slide 40: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Core Return on Tangible Common Equity ("Core ROTCE") FY 2016 FY 2015 FY 2014 Numerator ($ millions) GAAP net income available to common shareholders $ 1,037 $ (1,282) $ 882 less: Disc Ops, net of tax 44 (392) (225) add b ack: Original issue discount expense
Slide 41: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 Numerator ($ millions) Total noninterest expense $ 721 $ 735 $ 773 $ 710 $ 668 less: Rep and warrant expense (0) (2) (3) (1) (2) less: Insurance expense 207 222 293 218 201 less: Rep
Slide 42: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Efficiency Ratio FY 2016 FY 2015 FY 2014 Numerator ($ millions) Total noninterest expense $ 2,939 $ 2,761 $ 2,948 less: Rep and warrant expense (6) (13) (10) less: Insurance expense 940 879 988 less: Repositioning items 9 7 39 Adjusted noninterest
Slide 43: 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 16 3Q 16 2Q 16 1Q 16 4Q 15 Numerator Common equity tier 1 capital (transition) $ 13.0 $ 12.9 $ 12.8 $ 12.7 $ 12.5 DTAs arising from NOL and tax credit carryforward
Slide 44: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures $ in millions 4Q 16 3Q 16 4Q 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 $ 976 $ 15 $ 991 $ 996 $ 15 $ 1,011