Slide 1: Financial Outlook Update
Ally Financial Inc. Financial Outlook Update March 15, 2018 1
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: Agenda
Agenda 1 Overview and Summary Outlook 2 Business Overview 3 Financial Drivers 4 Capital and Balance Sheet Update 5 Conclusion CONFIDENTIAL 3
Slide 4: Ally Overview
Ally Overview Building the leading digital bank $167 billion of Assets $93 billion of Deposits (Top 15 US interest bearing deposits) Over 5 million customers Zero branches Asset Mix Funding Mix (end of period balances, gross receivables shown) (end of period balances) Retail Auto Other 41% 5% Deposi
Slide 5: Key Financial Themes and Priorities
Key Financial Themes and Priorities Financial path remains intact – incremental benefit from lower corporate tax rate Optimizing risk-adjusted returns in auto finance while maintaining leading position as full spectrum lender Balancing deposit growth and beta while continuing strategic objecti
Slide 6: Medium-term Outlook
Medium-term Outlook Financial path positioned to deliver: Accelerated and more diversified earnings growth Return on equity expansion Long-term operating leverage Medium-term Outlook(1) 2017 Actuals Medium-term(1) Adjusted EPS (2) growth 11% 18% + CAGR Core ROTCE(2) 9.8% 13% + Adjusted Effic
Slide 7: Near-term Outlook
Near-term Outlook Near-term Outlook 2017 Actual 2018 Target Adjusted EPS growth (YoY)(1) 11% 20 - 30% (1) Core ROTCE 9.8% 10.5 - 11.5% Net financing revenue (excld Core OID)(1) up 8% up 3 - 6% Other revenue relatively flat relatively flat Provision expense up 25% flat to down 10% Noninterest expense
Slide 8: Agenda
Agenda 1 Overview and Summary Outlook 2 Business Overview 3 Financial Drivers 4 Capital and Balance Sheet Update 5 Conclusion CONFIDENTIAL 8
Slide 9: Brief History
Brief History Transitioned to more resilient business model 1919 2006 2010 2015 2006 – 2009 2010 – 2014 2015 – forward Stabilization Restructuring Growth • Protected dealers during crisis • Shifted to dealer-centric model • Optimize risk-adjusted returns • Launched Ally Bank and • Enhanced bank digi
Slide 10: Capital and Liability Transformation
Capital and Liability Transformation Significant funding transformation with capacity for additional deposit growth Cost of funds 3.5% ↓ 160 bps 1.9% (excld Core OID and Core OID balance)(1) ($ billions) $169.7 $163.5 $17.3 $47.1 Unsecured debt (excld Core OID balance)(1) $36.9 $53.0 Secured debt $9
Slide 11: Ally Today
Ally Today A L LY A U T O A L LY I N V E S T INSURANCE DEPOSITS C O R P O R AT E FINANCE CASHBACK CARD Co-brand product(1) A L LY H O M E Building the leading digital bank 11 (1) The Ally CashBack Credit Card is issued by TD Bank N.A.
Slide 12: Proven Auto Finance Go-To-Market Strategy
Proven Auto Finance Go-To-Market Strategy Unique competitive advantages and capabilities Significant • $114 billion of total Auto Finance assets National Scale • ~18,500 active dealer relationships in all 50 states Relationship • Superior service model; multi-generational dealer relationships Based
Slide 13: Auto Finance Products – Market Presence
Auto Finance Products – Market Presence Comprehensive and valuable product suite and full-spectrum credit provider Theme: $68 • 5% market share in 2017(1) Retail Loans Billion • Optimizing risk-adjusted returns Commercial $37 • Largest dealer wholesale floorplan lender Loans Billion • Dealer floorpl
Slide 14: Product Expansion Update
Product Expansion Update Development of customer interface, technology and marketing to drive strategic initiatives Corporate • Pre-tax income of $114 million up $43 million YoY Finance • Growing with disciplined credit approach within new and existing verticals • Funded brokerage accounts up 7% YoY
Slide 15: Deposit and Customer Growth
Deposit and Customer Growth Strong brand and secular tailwinds driving digital banking growth To tal depo sits ($ billio ns) and retail depo sit custo mers (millio ns) Growth from: • New retail customers Best Internet Bank • Existing retail customers Best for Millennials • Ally Invest sweep depo
Slide 16: Ally and Direct Banks Increasing Market Share
Ally and Direct Banks Increasing Market Share Total growth slowed in 2017…. Retail growth in line with ‘10 – ’16 CAGR ($ trillions) ($ trillions) +6.8% +3.7% +4.6% +3.2% $12.1 $5.9 $11.6 $5.7 $10.9 $5.5 $10.4 $5.1 $5.2 $4.9 $5.0 $9.4 $9.8 $4.8 $8.8 $7.9 2010 2011 2012 2013 2014 2015 2016 2017 2010 2
Slide 17: Peer Deposit Pricing Changes and Balance Growth
Peer Deposit Pricing Changes and Balance Growth Strongest deposit growth rate with modest rate change Deposit Grow th and Deposit Beta – 3Q 2015 to 4Q 2017 Ally 4Q 17 $91.5 billion 50% Ally 3Q 15 $62.8 billion +46% Deposit Growth 40% 30% 20% 10% 0% -10% -20% Cumulative Deposit Increase Cumulative Be
Slide 18: Agenda
Agenda 1 Overview and Summary Outlook 2 Business Overview 3 Financial Drivers 4 Capital and Balance Sheet Update 5 Conclusion CONFIDENTIAL 18
Slide 19: Core Metric Trend
Core Metric Trend Adjusted Earnings per Share(1) Adjusted Total Net Revenue(2) ($ millio ns) $0.70 $1,480 $1,492 $1,472 $0.65 $0.58 $1,399 $379 $0.56 $1,383 $1,391 $388 $381 $0.54 $0.54 $1,372 $0.52 $0.52 $0.52 $1,353 $1,344 $0.51 $0.48 $1,313 $388 $0.46 $1,301 $1,295 $374 $392 $396 $358 $0.40 $332
Slide 20: Net Financing Revenue (excld Core OID)
Net Financing Revenue (excld Core OID)(1) Deposit growth and higher auto yields driving increase ($ millions) $4,292 Dynamics impacting progression: • Reduce unsecured and secured $3,964 funding footprint • Deposit growth and beta $3,764 • Higher loan yields / balances • Corporate Finance & Mortgage
Slide 21: Retail Auto Risk-Adjusted Yield Progression
Retail Auto Risk-Adjusted Yield Progression Expect asset yields to increase more than expected losses Estimated retail auto 2017 Average 2018 Expectations originated yield(1) of current originations 6.5 – 6.7% Dynamics impacting progression: Retail Auto • Volume and mix Yield (portfolio) 5.80% 6.0 -
Slide 22: Lease Dynamics
Lease Dynamics Used Vehicle Prices (YoY change) Ally Terminated Units Declining (# thousands) -0.1% 81 79 76 78 72 72 64 -2.4% 54 -3.6% -3.7% -3.5% 42 -4.8% 30 -5.0% 27 25 -5.8% 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18E 2Q 18E 3Q 18E 4Q 18
Slide 23: Other Revenue (Adj.)
Other Revenue (Adj.)(1) Focused on growth over medium-term due to product expansion initiatives ($ millions) $1,544 Dynamics impacting progression: $1,534 • Growing Insurance business • Loan sales / investment gains $1,498 • Contribution from scaling newer consumer products ‒ Wealth management fees
Slide 24: Provision Expense
Provision Expense Retail auto growth moderating and credit mix normalizing ($ millions) Dynamics impacting progression: • Mix and seasoning of portfolio $1,148 • Cyclical dynamics $91 ‒ Unemployment $917 $48 ‒ Used vehicle prices $20 $97 ‒ Consumer leverage $707 • Hurricane reserve $130 $1,010 $801
Slide 25: Retail Auto Net Charge-offs Normalizing
Retail Auto Net Charge-offs Normalizing Year-over-year change in annualized retail auto net charge-off rate; basis point change 50% YoY basis point change in retail auto NCO% YoY percent change in retail auto NCO% 46 40% 36 36 3Q / 4Q timing from hurricane 30% impacts 29 (temporary relief programs f
Slide 26: Low Loss Commercial Auto Portfolio
Low Loss Commercial Auto Portfolio Annual net charge-off rates for Ally’s Commercial Auto portfolio and Industry Commercial & Industrial (C&I) loans 2.8% 2.3% 1.8% 1.3% 0.8% 0.3% -0.2% Ally U.S. Commercial Auto Portfolio Industry C&I Source: Industry C&I data sourced from www.ffiec.org 26
Slide 27: Noninterest Expense
Noninterest Expense Positioning for the long-term by supporting deposit growth, technology and product expansion Noninterest Expense ($ millions) & Adjusted Efficiency Ratio (1) Dynamics impacting progression: • Continued technology enhancements and investments • Product expansion $3,110 • Marketing
Slide 28: Agenda
Agenda 1 Overview and Summary Outlook 2 Business Overview 3 Financial Drivers 4 Capital and Balance Sheet Update 5 Conclusion CONFIDENTIAL 28
Slide 29: Capital Allocation
Capital Allocation Expect earnings growth to support increased capital generation and deployment Historical CCAR Capital Plans Summary Payout CET1 Ratio(1) ($ millions) Repurchases Dividend Total Target Start Stress(2) CCAR ’16 $700 $151 $850 9.2% 5.2% >9.0% CCAR ’17 $760 $221 $982 9.4% 5.2% Share •
Slide 30: Interest Rate Positioning
Interest Rate Positioning • Balance Sheet Dynamics ‒ Consistently growing cost-efficient deposit base ‒ Short duration, fixed rate retail auto portfolio ‒ Floating rate commercial auto portfolio ‒ Growing fixed rate, longer duration mortgage and investment security portfolios ‒ Reduced reliance on h
Slide 31: Deposit Beta
Deposit Beta Modeling pass-through rate to steepen over time • Deposit growth expected to outpace balance sheet growth over next several years as funding mix is optimized • Deposit beta has lagged more than initially expected but has recently accelerated in line with original expectations • Expect c
Slide 32: Asset Mix
Asset Mix Expect growth from capital efficient assets while auto assets relatively flat FY 2016(1) FY 2017(1) Average Average Average Average 2018 Expectations ($ billions) Balance Yield Balance Yield $ • Relatively stable with potential for Retail Auto Loan 64 5.5% $ 67 5.8% growth $ Commercial Aut
Slide 33: Liability Mix
Liability Mix Expect funding mix to be normalized over next 2 - 3 years 2013 2017 Medium-term Target FHLB / Other FHLB / FHLB / 5% Other Other 15% Unsecured Unsecured 27% Deposits Unsecured 41% 11% Secured Deposits Deposits Secured ~70 - 75% 12% 62% Secured 28% Note: Funding profiles based on 4Q ave
Slide 34: Unsecured Maturities
Unsecured Maturities Significant benefit as unsecured debt maturities are replaced with low-cost deposits Ally Unsecured Debt Securities(1) Principal Am ount Illustrative EPS Savings ~$9 billion in Outstanding (2) Maturity Date Coupon ($ billions) @ Refi. Cost of:(3) 1.50% 2.50% maturities (4Q ‘17 –
Slide 35: Secured Debt Footprint
Secured Debt Footprint Secured funding continues to be efficient alternative for incremental funding FY 2016(1) FY 2017(1) Average Average Average Average ($ billions) Balance Yield Balance Yield Secured Facilities $ Bank 3 1.3% $ 2 2.0% Substantial reduction in parent funding needs given Tier 1 Lev
Slide 36: Agenda
Agenda 1 Overview and Summary Outlook 2 Business Overview 3 Financial Drivers 4 Capital and Balance Sheet Update 5 Near-term Outlook and Conclusion CONFIDENTIAL 36
Slide 37: 1Q 2018 Outlook
1Q 2018 Outlook 1Q Expectation Commentary • Continued YoY benefit from deposit growth and higher Net Financing yields Revenue Up 6 – 8% YoY • QoQ impacted by deposit pricing, balance sheet (excld Core OID)(1) positioning and lease gains Other Revenue Relatively flat YoY • Higher auto loan sale activ
Slide 38: Conclusion
Conclusion Continued execution along strong earnings growth path Auto finance business is successfully optimizing returns and navigating cyclical dynamics Strong secular trends towards digital banking creates tailwind for Ally Key focus on balancing expense and deposit beta with strategic in
Slide 39: Supplemental
Supplemental CONFIDENTIAL 39
Slide 40: Tax Dynamics
Supplemental Tax Dynamics Utilization of remaining disallowed DTA drives incremental organic capital generation • Expect ongoing effective tax rate of 23 – 24% • Continue to opportunistically target tax strategies to reduce ETR post tax reform ($ billions) $1.6 $1.6 $1.4 $1.4 $1.1 $1.1 $1.1 $1.1 $1.
Slide 41: Adjusted Tangible Book Value per Share
Supplemental Adjusted Tangible Book Value per Share(1) Expect continued Book Value growth along with improved returns ($ billions) Dynamics impacting progression: • Pace of earnings growth • Changes in AOCI $28.1 • Common distributions • Revenue recognition (adoption of new accounting pronouncements
Slide 42: Notes on non-GAAP and other financial measures
Supplemental Notes on non-GAAP and other financial measures The following are non-GAAP financial measures which Ally believes are important to the reader of the Consolidated Financial Statements, but which are supplemental to and not a substitute for U.S. GAAP measures: Adjusted Earnings per Share (
Slide 43: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Earnings per Share ("Adjusted EPS") FY 2017 FY 2016 FY 2015 Numerator ($ millions) GAAP net income attributable to common shareholders $ 929 $ 1,037 $ (1,282) less: Discontinued operations, net of tax (3) 44 (392) add back : Core OID & Accelerated
Slide 44: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 Numerator ($ millions) GAAP net income attributable to common shareholders $ 181 $ 282 $ 252 $ 214 $ 248 $ 209 $ 34
Slide 45: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Tangible Book Value per Share ("Adjusted TBVPS") FY 2017 FY 2016 FY 2015 Numerator ($ billions) GAAP shareholder's equity $ 13.5 $ 13.3 $ 13.4 less: Preferred equity - - (0.7) GAAP common shareholder's equity $ 13.5 $ 13.3 $ 12.7 less: Goodwill and
Slide 46: GAAP to Core Results - Quarterly
Supplemental GAAP to Core Results - Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 Numerator ($ billions) GAAP shareholder's equity $ 13.5 $ 13.6 $ 13.5 $ 13.4 $ 13.3 $ 13.6 $ 13.6 $ 13
Slide 47: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Core Return on Tangible Common Equity ("Core ROTCE") FY 2017 FY 2016 FY 2015 Numerator ($ millions) GAAP net income attributable to common shareholders $ 929 $ 1,037 $ (1,282) less: Discontinued operations, net of tax (3) 44 (392) addback: add b ack: Core C
Slide 48: GAAP to Core Results - Annual
Supplemental GAAP to Core Results - Annual Adjusted Efficiency Ratio FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ millions) Total noninterest expense $ 3,110 $ 2,939 $ 2,761 $ 2,948 less: Rep and warrant expense (0) (6) (13) (10) less: Insurance expense 950 940 879 988 less: Repositioning items - 9
Slide 49: GAAP to Core Results
Supplemental GAAP to Core Results ($ millions) 4Q 17 3Q 17 4Q 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 $ 1,094 $ 19 $ 1,113 $ 1,081 $ 18 $ 1,099 $ 976
Slide 50: GAAP to Core Results
Supplemental GAAP to Core Results Original Issue Discount Expense ANNUAL TREND QUARTERLY TREND ($ millions) FY 2017 FY 2016 FY 2015 FY 2014 FY 2011 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 3Q 16 2Q 16 1Q 16 4Q 15 3Q 15 2Q 15 1Q 15 4Q 14 Core original issue discount expense (1) $ 71 $ 57 $ 45 $ 172 $ 912 $ 19 $