Slide 1: Ally Financial Inc. 3Q 2018 Earnings Review
Ally Financial Inc. 3Q 2018 Earnings Review October 25, 2018 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 - Quarterly
GAAP and Core Results - Quarterly ($ millions except per share data) 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 GAAP net income attributable to common shareholders ("NIAC") $ 374 $ 349 $ 250 $ 181 $ 282 (1)(2) Core net income attributable to common shareholders $ 386 $ 358 $ 300 $ 310 $ 292 GAAP earnings per com
Slide 4: Third Quarter Highlights
Third Quarter Highlights Sustained execution along strategic and financial path ➢ Adjusted EPS(1) of 91 cents – up 41% YoY | Core ROTCE(1) of 13.7%, up 340 bps YoY ➢ Total net revenues exceeding $1.5 billion ➢ Auto optimization evident in improved risk-adjusted returns − Consumer auto originations o
Slide 5: Core Metric Trend
Core Metric Trend Adjusted Earnings per Share(1) Adjusted Total Net Revenue(2) $0.91 ($ millio ns) $1,521 $1,472 $1,480 $1,492 $0.83 $1,463 $1,471 $392 $1,399 $1,391 $381 $379 $356 $0.70 $1,372 $1,383 $388 $0.68 $394 $0.65 $1,353 $1,344 $1,313 $388 $0.56 $0.58 $374 $392 $396 $0.54 $0.54 $358 $0.51 $
Slide 6: Third Quarter Financial Results
Third Quarter Financial Results ($ millions; except per share data) Increase / (Decrease) vs. 3Q 18 2Q 18 3Q 17 2Q 18 3Q 17 Net financing revenue (excluding Core OID) (1) $ 1,129 $ 1,115 $ 1,099 $ 14 $ 30 Core OID (22) (21) (18) (1) (4) Net financing revenue (as reported) $ 1,107 $ 1,094 $ 1,081 $ 1
Slide 7: 2018 Full-Year Revised Outlook
2018 Full-Year Revised Outlook 2018 Original 2018 FY Update (1) Adjusted EPS growth (YoY) 20 - 30% 35 - 40% (1) Core ROTCE 10.5 - 11.5% 12% + (1) Net financing revenue (excld Core OID) up 3 - 6% up 3 - 6% (1) Other revenue (excld change in fair value of equity securities) relatively flat relatively
Slide 8: Net Financing Revenue
Net Financing Revenue • Net financing revenue (excluding Core OID)(1) of $1,129 million, up $30 million YoY driven by asset and deposit growth and liability mix shift • Net financing revenue (excluding Core OID)(1) up QoQ including higher retail and commercial auto yields − NIM of 2.67%; NIM (exclud
Slide 9: Deposits
Deposits • Total deposits of $101.4 billion – up $11.3 billion YoY Stable, consistent growth of retail deposits − Customer retention remains strong at 96% in 3Q Deposit Levels (EOP) and Customer Retention Rate ($ billions) • 3Q retail deposit growth of $2.9 billion QoQ $90.1 $93.3 $97.4 $98.7 $101.4
Slide 10: Stable Deposit Vintages
Stable Deposit Vintages ➢ Every retail deposit vintage stable or growing ➢ 35 consecutive quarters of YoY double-digit percentage growth ➢ Deposits provide low-cost funding with long-term structural benefit − Replaces high-cost unsecured debt maturities − Funds asset growth − Alternative to wholesal
Slide 11: Capital
Capital • Preliminary fully phased-in Basel III CET1 ratio of 9.4% Capital Ratios(1) and Risk-Weighted Assets − CET1 relatively flat YTD – organic capital generation 13.2% 12.9% from earnings and disallowed DTA utilization 12.5% 12.6% 12.7% 11.4% 11.2% 11.1% 11.1% 11.0% supporting common shareholder
Slide 12: Asset Quality
Asset Quality Consolidated Net Charge-Offs Provision Expense ($ millions) 1.01% 0.88% Provision Expense 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 0.86% 0.85% 0.84% 0.75% Retail Auto $ 260 $ 314 $ 286 $ 253 $ 168 $ 229 0.66% 0.57% Commercial Auto 6 (2) 2 6 2 - Mortgage Finance 1 4 2 2 - 2 Corporate Finance
Slide 13: Auto Finance – Results
Auto Finance – Results • Auto Finance reported pre-tax income of $383 million, Increase/(Decrease) vs. up $83 million YoY and up $1 million QoQ Key Financials ($ millions) 3Q 18 2Q 18 3Q 17 Net financing revenue $ 956 $ 31 $ 6 Total other revenue 80 17 (2) – Net financing revenue up YoY and QoQ due
Slide 14: Auto Finance – Key Metrics
Auto Finance – Key Metrics Consumer Originations Origination Mix ($ billions; % of $ originations) (% of $ originations) $9.5 $9.6 $9.1 42% $8.6 $8.1 47% 45% 50% $8.1 51% 53% 39% 44% 45% 41% 40% 47% 11% 14% 13% 11% 13% 12% 30% 29% 26% 28% 28% 28% 40% 44% 44% 39% 36% 35% 30% 32% 32% 30% 27% 26% 2Q 17
Slide 15: Auto Loan Migration Dynamics
Auto Loan Migration Dynamics Consistent Optimizing of Originated Yields Disciplined Credit Underwriting Retail Auto Portfolio and Estimated Retail Auto Originated Yield (1) Retail Auto Originations by Nonprime % and Average FICO Portfolio Yield Estimated Retail Auto Originated Yield + 132 bps 7.53%
Slide 16: Insurance
Insurance • Pre-tax income of $55 million Increase/(Decrease) vs. • Core pre-tax income(1) of $48 million, down $21 Key Financials ($ millions) 3Q 18 2Q 18 3Q 17 Premiums, service revenue earned and other $ 260 $ 19 $ 7 million YoY and up $45 million QoQ Losses and loss adjustment expenses 77 (24) 1
Slide 17: Corporate Finance
Corporate Finance • Pre-tax income of $36 million Increase/(Decrease) vs. • Core pre-tax income(1) of $36 million, up $14 million YoY Key Financials ($ millions) 3Q 18 2Q 18 3Q 17 and down $21 million QoQ Net financing revenue $ 50 $ (7) $ 11 Total other revenue (adjusted) (1) – Net financing revenu
Slide 18: Mortgage Finance
Mortgage Finance • Pre-tax income of $8 million in 3Q, up $6 million Increase/(Decrease) vs. YoY and down $6 million QoQ Key Financials ($ millions) 3Q 18 2Q 18 3Q 17 Net financing revenue $ 44 $ - $ 12 – Higher net financing revenue YoY driven by asset Total other revenue 2 - - balance growth from
Slide 19: Conclusion
Conclusion ➢ Sustained execution along strategic earnings growth path ➢ Auto finance business optimizing retail auto returns ➢ Deposit franchise provides structural benefit to long-term earnings growth path ➢ Strong customer growth supports the long-term strategic path ➢ Focused on building scale in
Slide 20: Supplemental Charts
Supplemental Charts
Slide 21: Results by Segment
Supplemental Results by Segment Pre-Tax Income Increase/(Decrease) vs. ($ millions) 3Q 18 2Q 18 3Q 17 2Q 18 3Q 17 Automotive Finance $ 383 $ 382 $ 300 $ 1 $ 83 Insurance 55 11 69 44 (14) Dealer Financial Services $ 438 $ 393 $ 369 $ 45 $ 69 Corporate Finance 36 58 22 (22) 14 Mortgage Finance 8 14 2
Slide 22: Funding and Liquidity
Supplemental Funding and Liquidity • Ally Bank funded assets at 87% up 8 pts YoY Growth in Bank Funded Assets • Deposits at 65% of total funding (ex Core OID balance) ($ billions) up 4 pts YoY $167.1 $170.0 $171.3 $173.1 $164.0 • $0.8 billion of new secured funding in 3Q 18 – $0.8 billion dealer flo
Slide 23: Corporate and Other
Supplemental Corporate and Other • Corporate and Other includes the impact of centralized Increase/(Decrease) vs. Key Financials ($ millions) 3Q 18 2Q 18 3Q 17 asset and liability management, corporate overhead Net financing revenue $ 43 $ (12) $ (2) allocation activities, the legacy mortgage portfo
Slide 24: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impacts (1): Baseline vs. Forward Curve 3Q 18 2Q 18 (2) (2) ($ millions) Gradual Instantaneous Gradual Instantaneous -100 bp $ (21) $ (31) $ (28) $ (80) +100 bp $ (3) $ (70) $ (7) $ (72) Stable rate environment n/m $ (59) n/m $ (27) (1) Ne
Slide 25: Deferred Tax Asset
Supplemental Deferred Tax Asset Deferred Tax Asset 3Q 18 (1) 2Q 18 (1) ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Net Operating Loss (Federal) $ 15 $ - $ 15 $ 125 Tax Credit Carryforwards 2,037 (986) 1,051 1,030 State/Local Tax Carryforwards
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, GAAP measures: Adjusted Earnings per Share (Adj
Slide 27: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 Numerator ($ millions) GAAP net income attributable to common shareholders $ 374 $ 349 $ 250 $ 181 $ 282 $ 252 $ 21
Slide 28: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 Numerator ($ billions) GAAP shareholder's equity $ 13.1 $ 13.1 $ 13.1 $ 13.5 $ 13.6 $ 13.5 $ 13.4 $ 13
Slide 29: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 Numerator ($ millions) GAAP net income attributable to common shareholders $ 374 $ 349 $ 250 $ 181 $ 282 Discontinued operations, net of tax - (1) 2 (2) (2
Slide 30: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 Numerator ($ millions) GAAP noninterest expense $ 807 $ 839 $ 814 $ 769 $ 753 Rep and warrant expense (0) 2 0 0 0 Insurance expense (241) (268) (231) (213) (218) Adjusted noninterest
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) 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 Numerator Common equity tier 1 capital (transition) $ 13.4 $ 13.3 $ 13.1 $ 13.2 $ 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 ($ millions) 3Q 18 2Q 18 3Q 17 Change in the Change in the Change in the Core OID & Core OID & Core OID & fair value of fair value of fair value of GAAP Repositioning Non-GAAP (1) GAAP Repositioning Non-GAAP (1) GAAP Repositioning Non-GAAP
Slide 33: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures Original issue discount amortization expense QUARTERLY TREND ($ millions) 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 Core original issue discount (Core OID) amortization expense (1) $ 22 $ 21 $ 20 $ 19 $ 1