Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q3 2023 Earnings Presentation
46 slides from Ally Financial's earnings presentation, Oct 18, 2023
Slide 1: Ally Financial Inc. 3Q 2023 Earnings Review
3Q 2023 Preliminary Results Ally Financial Inc. 3Q 2023 Earnings Review October 18, 2023 Contact Ally Investor Relations at (866) 710-4623 or investor.relations@ally.com 1
Slide 2: Forward-Looking Statements and Additional Information
3Q 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
3Q 2023 Preliminary Results GAAP and Core Results: Quarterly 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 ($ millions, except per share data) GAAP net income attributable to common shareholders (NIAC) $ 269 $ 301 $ 291 $ 251 $ 272 (1)(2) Core net income attributable to common shareholders $ 252 $ 291 $ 250 $ 327 $
Slide 4: Leadership Update
3Q 2023 Preliminary Results Leadership Update Strategically, Operationally and Culturally Transformed Rebranded to Ally from GMAC 2010 Look IPO and Exited TARP ($20B Repayment) 2014 L Externally Reached 1 Million Deposit Customers 2015 Execute Initiated Buybacks and Dividends 2016 E with Excellence
Slide 5: 3Q 2023 Highlights
3Q 2023 Preliminary Results 3Q 2023 Highlights $0.88 | $0.83 9.9% | 12.9% $2.0B | $2.0B 3.3% | 10.7% GAAP Adj. Return on Core GAAP Adj. Total NIM (2) Est. Retail EPS EPS(1) Common Equity ROTCE (1) Net Revenue Net Revenue (1) (ex. OID) Originated Yield (3) Notable Items • Proactive expense management
Slide 6: Managing a Dynamic Environment
3Q 2023 Preliminary Results Managing a Dynamic Environment Positioned for long-term earnings expansion despite volatile market backdrop Net Interest Margin - Near-term compression from higher rates, in-line with expectations - Record auto application volume driving pricing power; ~95% retail auto pr
Slide 7: Differentiated Offerings & Strong Customer Engagement
3Q 2023 Preliminary Results Differentiated Offerings & Strong Customer Engagement Proven scale and stability through cycles 3.0M $140B 92% 96% Retail Deposit Retail Deposit FDIC Insured Customer Customers Balances Deposits Retention(1) Record YTD Growth 14+ Years of ↑ 3 Percentage Industry (↑ 307k)
Slide 8: Funding and Liquidity
3Q 2023 Preliminary Results Funding and Liquidity High-quality deposit funding and strong liquidity position Funding Composition Total Available Liquidity ($ billions) Unsecured Debt Cash and Equivalents FHLB / Other FHLB Unused Pledged Borrowing Capacity Secured Debt FRB Discount Window Pledged Cap
Slide 9: Impact of Newly Proposed Regulation (Basel III Endgame)
3Q 2023 Preliminary Results Impact of Newly Proposed Regulation Actively assessing proposed regulation and engaged in industry response • Category III and IV banks required to include AOCI impacts in regulatory capital Elimination of AOCI • Three-year phase-in period beginning in 3Q ’25 Basel III En
Slide 10: Noninterest Expense Dynamics
3Q 2023 Preliminary Results Noninterest Expense Dynamics Reducing expense growth considering near-term revenue headwinds • Targeting <1% growth in controllable noninterest expense(1) in 2024 (2% total noninterest expense growth) – More than 80% of 2024 total growth driven by Insurance (more than off
Slide 11: 3Q 2023 Financial Results
3Q 2023 Preliminary Results 3Q 2023 Financial Results Increase / (Decrease) vs. Consolidated Income Statement 3Q 23 2Q 23 3Q 22 2Q 23 3Q 22 ($ millions, except per share data) Net financing revenue $ 1,533 $ 1,573 $ 1,719 $ (40) $ (186) (1) Core OID 12 12 11 0 2 (1) Net financing revenue (ex. Core O
Slide 12: Balance Sheet and Net Interest Margin
3Q 2023 Preliminary Results Balance Sheet and Net Interest Margin 3Q 23 2Q 23 3Q 22 Average Average Average Balance Yield Balance Yield Balance Yield ($ millions) Retail Auto Loans $ 85,131 8.90% $ 84,097 8.81% $ 82,362 7.29% Memo: Impact from hedges 0.74% 0.94% 0.25% Auto Leases (net of depreciatio
Slide 13: Capital
3Q 2023 Preliminary Results Capital • 3Q ‘23 CET1 ratio of 9.3% and TCE / TA ratio of 4.9%(1) Capital Ratios and Risk-Weighted Assets ($ billions) • $3.7B of CET1 capital above FRB requirement of 7.0% Total Capital (Regulatory Minimum + SCB) Ratio Tier 1 Ratio – 9.0% internal operating target CET1 R
Slide 14: Asset Quality: Key Metrics
3Q 2023 Preliminary Results Asset Quality: Key Metrics Consolidated Net Charge-Offs (NCOs) Net Charge-Off Activity ($ millions) 3Q 22 4Q 22 1Q 23 2Q 23 3Q 23 Annualized Retail Auto $ 217 $ 347 $ 351 $ 277 $ 393 NCO Rate Commercial Auto - - - 4 - Mortgage Finance 1 - - - - Corporate Finance 31 - - 56
Slide 15: Asset Quality: Coverage and Reserves
3Q 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 16: Auto Finance: Agile Market Leader
3Q 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 17: Auto Finance: Demonstrating Strength and Scale
3Q 2023 Preliminary Results Auto Finance: Demonstrating Strength and Scale Simple message to dealers encouraging Ally consideration on all application volume Record application flow allows selective underwriting, and strong pricing and risk-adjusted returns Retail auto volume and credit tier mix Est
Slide 18: Retail Auto Portfolio Yield Migration
3Q 2023 Preliminary Results Retail Auto Portfolio Yield Migration Retail portfolio repricing remains a meaningful tailwind • Strong performance through current tightening cycle creates significant momentum – Auto beta of ~95%, deposit beta of ~70%; creates significant momentum over medium-term • Por
Slide 19: Retail Auto Credit Performance
3Q 2023 Preliminary Results Retail Auto Credit Performance Performance in-line with expectations and on track for full-year NCOs of 1.8% • Retail auto NCO rate of 1.85% is at the mid-point of prior guide (1.8 – 1.9%) – Flow to loss rates remained stable year-to-date and favorable to pre-pandemic lev
Slide 20: Used Vehicle Value Outlook
3Q 2023 Preliminary Results Used Vehicle Value Outlook Used vehicle values forecasted to decline 4% in 4Q ‘23 (4% decline on a FY basis) • Maintain longer-term outlook for further decline in used vehicle values, but expecting support for values in 4Q ‘23 driven by UAW strike – Dealers built vehicle
Slide 21: Auto Finance
3Q 2023 Preliminary Results Auto Finance • Auto pre-tax income of $377 million Inc / (Dec) v. Key Financials ($ millions) 3Q 23 2Q 23 3Q 22 – Pre-tax income down YoY, primarily driven by lower net loss Net financing revenue $ 1,360 $ 11 $ 57 performance in prior year period Total other revenue 79 (4
Slide 22: Insurance
3Q 2023 Preliminary Results Insurance • Insurance pre-tax loss of $16 million and core pre-tax Inc / (Dec) v. income of $30 million(1) Key Financials ($ millions) 3Q 23 2Q 23 3Q 22 Premiums, service revenue earned and other income $ 324 $ 12 $ 32 – $324 million of earned premiums, representing highe
Slide 23: Ally Bank: Deposit and Customer Trends
3Q 2023 Preliminary Results Ally Bank: Deposit and Customer Trends #1 3M 58 $140B 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 $152.8 billion, up
Slide 24: Ally Bank: Leading, Growing, and Diversified
3Q 2023 Preliminary Results Ally Bank: Leading, Growing, and Diversified Continued focus on deepening customer relationships • Leading, all-digital direct bank with complementary Ally Invest (Brokerage & Wealth) Net Customer Assets ($ in billions) | Acquired: 2Q’16 product suite % of New Accts from
Slide 25: Corporate Finance
3Q 2023 Preliminary Results Corporate Finance Inc / (Dec) v. • Corporate Finance pre-tax income of $84 million Key Financials ($ millions) 3Q 23 2Q 23 3Q 22 – Net financing revenue up YoY reflecting higher average asset Net financing revenue $ 97 $ 5 $ 17 balances Other revenue 24 (4) (30) Total net
Slide 26: Mortgage Finance
3Q 2023 Preliminary Results Mortgage Finance Inc / (Dec) v. • Mortgage pre-tax income of $26 million Key Financials ($ millions) 3Q 23 2Q 23 3Q 22 – Noninterest expense down $10 million YoY, reflecting the benefit Net financing revenue $ 53 $ - $ (4) of partnership DTC origination model Total other
Slide 27: 2023 Financial Outlook
3Q 2023 Preliminary Results 2023 Financial Outlook Prior Current Outlook Outlook Net Interest Margin 3.4% >3.3% Other Revenue $1.9B $1.9B Retail Auto Portfolio Yield (4Q ‘23) 9.0% 9.0% Retail Deposit Portfolio Yield (4Q ‘23) 4.1% 4.1 - 4.2% Retail Auto NCOs 1.8% 1.8% Adj. Noninterest Expense $4.9B $
Slide 28: Strategic Priorities
3Q 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 29: Supplemental
3Q 2023 Preliminary Results Supplemental 29
Slide 30: Results By Segment
Supplemental 3Q 2023 Preliminary Results Results By Segment GAAP to Core pre-tax income Walk Inc / (Dec) v. ($ millions) Segment Detail 3Q 23 2Q 23 3Q 22 2Q 23 3Q 22 Automotive Finance $ 377 $ 501 $ 488 $ (124) $ (111) Insurance (16) 8 (30) (24) 14 Dealer Financial Services $ 361 $ 509 $ 458 $ (148)
Slide 31: Funding Profile Details
Supplemental 3Q 2023 Preliminary Results Funding Profile Details Funding Mix Deposit Mix Unsecured Brokered / FHLB / Other Other Secured Retail CD Deposits MMA/OSA/ Spend Note: Totals may not foot due to rounding. Note: Other includes sweep deposits, mortgage escrow and other deposits. Totals may no
Slide 32: Corporate and Other
Supplemental 3Q 2023 Preliminary Results Corporate and Other Inc / (Dec) v. • Pre-tax loss of $243 million and Core pre-tax loss of ($ millions) Key Financials 3Q 23 2Q 23 3Q 22 $191 million(1) Net financing revenue $ (6) $ (56) $ (261) Total other revenue 35 (18) 109 – Net financing revenue lower Y
Slide 33: Interest Rate Risk
Supplemental 3Q 2023 Preliminary Results Interest Rate Risk Net Financing Revenue Sensitivity Analysis (1) ($ millions) 3Q 23 2Q 23 Change in interest rates Gradual (2) Instantaneous Gradual (2) Instantaneous -100 bps $ (111) $ (100) $ (109) $ (117) +100 bps $ 97 $ 101 $ 96 $ 121 Stable rate environ
Slide 34: Deferred Tax Asset
Supplemental 3Q 2023 Preliminary Results Deferred Tax Asset Deferred Tax Asset 3Q 23(1) 2Q 23 ($ millions) Gross DTA Valuation Net DTA Net DTA Balance Allowance Balance Balance Net Operating Loss (Federal) $ 9 $ - $ 9 $ 7 Tax Credit Carryforwards 768 (526) 242 545 State/Local Tax Carryforwards 317 (
Slide 35: Notes on Non-GAAP Financial Measures
Supplemental 3Q 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 36: Notes on Non-GAAP Financial Measures
Supplemental 3Q 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 37: Notes on Non-GAAP Financial Measures
Supplemental 3Q 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 38: Notes on Other Financial Measures
Supplemental 3Q 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 39: Additional Notes
Supplemental 3Q 2023 Preliminary Results Additional Notes Page – 16 | Auto Finance: Agile Market Leader (1) ‘Prime Auto Lender’ - Source: PIN Navigator Data & Analytics, a business division of J.D. Power. The credit scores provided within these reports have been provided by FICO® Risk Score, Auto 08
Slide 40: Additional Notes
Supplemental 3Q 2023 Preliminary Results Additional Notes Page – 30 | Results by Segment (2) 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
Slide 41: GAAP to Core Results: Adjusted EPS
Supplemental 3Q 2023 Preliminary Results GAAP to Core Results: Adjusted EPS Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 Numerator ($ millions) GAAP net income attributable to common shareholders $ 269 $ 30
Slide 42: GAAP to Core Results: Adjusted TBVPS
Supplemental 3Q 2023 Preliminary Results GAAP to Core Results: Adjusted TBVPS Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 Numerator ($ billions) GAAP shareholder's equity $ 12.8 $ 13.5 $ 13.4
Slide 43: GAAP to Core Results: Core ROTCE
Supplemental 3Q 2023 Preliminary Results GAAP to Core Results: Core ROTCE Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 Numerator ($ millions) GAAP net income attributable to common shareholders $ 26
Slide 44: GAAP to Core Results: Adjusted Efficiency Ratio
Supplemental 3Q 2023 Preliminary Results GAAP to Core Results: Adjusted Efficiency Ratio Adjusted Efficiency Ratio QUARTERLY TREND 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 Numerator ($ millions) GAAP noninterest expense $ 1,232 $ 1,249 $ 1,266 $ 1,266 $ 1,161 Rep and warrant expense - - - - - Insurance expense
Slide 45: Non-GAAP Reconciliation: Core Income
Supplemental 3Q 2023 Preliminary Results Non-GAAP Reconciliation: Core Income ($ millions) 3Q 23 2Q 23 3Q 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 46: Non-GAAP Reconciliations
Supplemental 3Q 2023 Preliminary Results Non-GAAP Reconciliations Net Financing Revenue (ex. Core OID) QUARTERLY TREND ($ millions) 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 GAAP Net Financing Revenue [x] $ 1,533 $ 1,573 $ 1,602 $ 1,674 $ 1,719 $ 1,764 $ 1,693 $ 1