Ally Financial Inc. · NYSE:ALLY
Ally Financial — Investor Day (February 2016)
139 slides from Ally Financial's investor day presentation, Feb 11, 2016
Slide 1: Investor Day, Thursday February 11
Thursday, February 11 8:00 a.m. – 12:30 p.m.
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. In the presentation th
Slide 3: Agenda
Agenda Presentation Primary Speaker Start Time End Time Enterprise Overview & Strategy Jeff Brown (JB) 8:00 am 8:30 am Chief Executive Officer Dealer Financial Services Tim Russi 8:30 am 9:30 am President – Auto Finance Deposits and Consumer Products Diane Morais 9:30 am 10:15 am CEO & President – A
Slide 4: Management Presenters
Management Presenters Jeff Brown, Chief Executive Officer • Named Chief Executive of Ally Financial in February 2015 and also serves on the Ally Board of Directors • Joined Ally as Corporate Treasurer in March 2009, and served in a variety of key leadership roles, including President and CEO of Ally
Slide 5: Additional Participants
Additional Participants Doug Timmerman, President, Ally Insurance • Named President of Ally Insurance in the spring of 2014 • Joined Ally in 1986 and has held a variety of leadership roles within the organization in commercial lending, consumer lending, collections, sales and marketing • Most recent
Slide 6: Enterprise Overview and Strategy
Enterprise Overview Jeff Brown (JB) and Strategy Chief Executive Officer 6
Slide 7: Strong Fundamentals and Unique Opportunities
Strong Fundamentals and Unique Opportunities Strong Foundation Industry Leading Auto Finance Franchise “Best Online Bank” Building on Strong Foundation Operational Evolution Financial Opportunities • Digitization is transforming the • Lower preferred dividends market, playing to Ally’s strengths • N
Slide 8: Core Strengths
Core Strengths ü Defining presence in the auto finance market ü Strong and embedded auto dealer relationships ü Digital capabilities transforming traditional banking and auto finance ü Award winning deposit platform ü Loyal and growing customer base ü Culture built on superior customer service and i
Slide 9: Strong Fundamental Momentum
Strong Fundamental Momentum Successfully Repositioned Origination Mix ($ billions) $41.0 %∆ YoY $41.0 $3.4 $13.3 $15.2 +21% $12.6 $9.6 +41% $6.8 +53% $12.7 $8.3 2014 2015 Growth Chrysler GM Standard GM Subvented • Used originations totaled $14.8 billion, or 36% of 2015 originations Growth channel re
Slide 10: Strong Fundamental Momentum
Strong Fundamental Momentum Record Auto Application Volume (millions) 10.6 9.1 7.8 6.7 5.6 3.7 2010 2011 2012 2013 2014 2015 10
Slide 11: Strong Fundamental Momentum
Strong Fundamental Momentum Strong Deposit Growth (billions) $66.2 $57.8 $52.8 $10.7 $45.0 $9.9 $9.7 $37.6 $31.8 $9.9 $9.9 $10.0 $55.4 $43.2 $48.0 $35.0 $21.8 $27.7 2010 2011 2012 2013 2014 2015 Ally Bank Retail Ally Bank Brokered • Ally Bank currently funds 98% of commercial auto and 75% of consume
Slide 12: Strong Fundamental Momentum
Strong Fundamental Momentum Strong Customer Growth (millions) 5.5 5.3 5.1 4.8 4.4 4.0 2010 2011 2012 2013 2014 2015 Includes consumer auto accounts, dealer relationships and retail deposit customers 12
Slide 13: Our Industry is Evolving
Our Industry is Evolving Consumer preferences are creating opportunities for innovation Auto 75% 75% Financing Utilize digital channels as their Would buy a car online if they primary information source1 could experience the car virtually2 Direct 333% 77% Increase in weekly mobile Banking banking us
Slide 14: Well Positioned as Marketplace Evolves
Well Positioned as Marketplace Evolves • Proven ability to execute with successful 70% of consumers who online deposit platform plan to apply for checking would prefer to do so in • Banking continues trend toward digitization digital channels1 • No historical baggage of traditional banks 56% of car
Slide 15: Attractive Customer Base for Expansion
Attractive Customer Base for Expansion • 5.5 million customers with unique Age Distribution Shift demographics and financial profiles • 47% of new depositors are across the franchise millennials, compared to 35% of • Only 19k customers have auto and the existing portfolio deposit overlap • Average a
Slide 16: Planting Seeds for the Future in 2016 – Ally 2.0
Planting Seeds for the Future in 2016 – “Ally 2.0” Integrate Customer • “One Ally” Experience • Integration of businesses can lead to better consumer profitability Technology • Stay on leading edge of digital technology Investments • Improve flexibility and speed across lending platform Auto Product
Slide 17: Possibilities White Board
Possibilities White Board Future of Auto Autonomous Wealth Management Vehicles Direct Online Changing Ride Lending “Robo Advisor” Brokerage Consumer Sharing Behavior Other Lending Verticals Leverage Auto Platform Student Powersport Card Commercial Equipment Personal Small Fleet Treasury Trucks Mortg
Slide 18: Regulatory Progress and Priorities
Regulatory Progress and Priorities • Non-objection to 2015 CCAR Submission - Approval to redeem $1.3 billion of Series G Preferred - Approval to eliminate $1.0 billion of Series A Preferred Important - Approval to redeem $500 million of Trust Preferred Progress in 2015 • Mid-cycle approval to addres
Slide 19: Milestones for 2016
Milestones for 2016 • Maintain a leading auto finance position Business Fundamentals • $7.5 billion of annual deposit growth Business and Customer • Expand in alternative auto lending channels Expansion • Introduce mortgage and credit card Capital Management • Initiate dividend and share buyback pro
Slide 20: Highest Priority on Capital Management
Highest Priority on Capital Management Foundational: Earn appropriate returns on outstanding shareholder capital • Priorities: - Take care of Ally customers for the long-term - Optimize ROE vs. growth - Increase avenues for attractive capital deployment - Disciplined risk management - CCAR process r
Slide 21: Plan to Drive Total Shareholder Return
Plan to Drive Total Shareholder Return Initiate a • Targeting 1-2% yield initially Common • Grow dividend over time Dividend • Near term: Lower preferred dividends • Longer term: Expand EPS - Continued bank funding expansion - Balance business expansion vs. return of capital • Further improve return
Slide 22: Significant Potential For Total Shareholder Return
Significant Potential For Total Shareholder Return • Focused on improving multiples and growing book value Example 3 Year Cumulative Total Shareholder Return Adjusted Tangible Book Value Per Share1 Growth 7% 8% 9% 10% 11% 12% $30.14 $30.99 $31.86 $32.74 $33.64 $34.56 1.2 129% 135% 142% 149% 155% 162
Slide 23: Dealer Financial Services: Auto Finance
Dealer Financial Tim Russi Services President, Auto Finance Auto Finance 23
Slide 24: Industry Snapshot
Industry Snapshot • New vehicle sales expected to increase modestly in near-term Sales • Steady volume of off lease vehicles will slightly impact 2016 used car prices; Strength in trucks and SUVs favoring domestics – oil prices is primary factor • Remaining fairly disciplined in production, pricing
Slide 25: Ally Auto Finance: Leading Today; Ready for Tomorrow
Ally Auto Finance: Leading Today; Ready for Tomorrow 2015 Successful transformation led to strong results Ongoing Adaptability and customer focus are keys to success Longer-term Market-leadership culture, innovative spirit and great relationships will advantage us in navigating the future 25
Slide 26: Ally Auto Transformation
Ally Auto Transformation Historical Yesterday Today Tomorrow Captive Transition Dealer Centric Category (until 2008) (‘09-’13) (‘13- present) Leadership • Exclusive • Decreased GM • No exclusivity • Innovate digitally relationship with exclusivity • Fully diversified • Leverage GM to provide • Focus
Slide 27: 2015 Originations Overview by Channel
2015 Originations Overview by Channel 2015 YoY % Change in 2015 Loans Per Channel Originations Channel Dealer Per Month 4 Growth +53% (+1 vs. 2014) 12 Chrysler +41% (+3 vs. 2014) GM New and Used Standard Retail +21% 13 (-4 vs. 2014) GM Subvented Loan and Lease -74% Building Dealer Advocacy 27
Slide 28: Ally is the closest we will get to perfect
“Ally is the closest we will get to perfect” - Inder Dosajnh “The relationship between the financial “Ally is there for the Automotive people. provider and the dealer is the most If it hadn’t been for Ally, I wouldn’t have important relationship in any automotive been able to expand and buy another
Slide 29: Growth Channel – Diverse Products and Relationships
Growth Channel – Diverse Products and Relationships 2015 Originations by Product 2015 Originations by Tier Lease C D 7% 8% 1% S 25% New Retail B 38% 24% Used Retail 55% A 42% 2015 New Growth Originations by Active Dealer Participation Nameplate 10,946 Other Honda / 8% Acura 3.9 RV 5% Ford / Lincoln
Slide 30: 2015: Transformation Was Tested and Proven
2015: Transformation Was Tested and Proven Total Originations 2014 to 2015 ($ billions) $41.0 $41.0 $2.1 $1.3 $2.5 Non-Prime Non-GM Strategy $9.9 $3.4 Lease Non-GM $0.6 Prime Retail 84-Month Loss of GM GM Standard Prime Lease and Prime Retail Strategy Subv ented ~80% of lost GM business was replaced
Slide 31: Focus on Risk-Adjusted Returns
Focus on Risk-Adjusted Returns Buy Rate and NAALR by Credit Tier (2014 and 2015) 20.0% 16.0% 12.0% 8.0% 4.0% 0.0% S A B C D 2015 Rate 2014 Rate 2015 NAALR 2014 NAALR S A B C D % of '14 and '15 Originations 34% 38% 20% 7% 1% Credit Tier = Ally internal credit score, incorporating numerous borrower an
Slide 32: Keys to Success: Customer Approach and Adaptability
Keys to Success: Customer Approach and Adaptability Be an “ally” from many perspectives - Products, Ally Philosophy: service, training, customer touchpoints/loyalty, insurance, remarketing, community service Relationship Depth of 25% of dealers use 4+ products; 25% of Driven Relationships: floorplan
Slide 33: Differentiated and Unmatched Approach
Differentiated and Unmatched Approach Comprehensive and Valuable Product Suite Used Retail New Retail Loans Leases Loans Commercial Insurance SmartAuction Loans Products More Than Making Loans Performance Dealer Marketing Ally Dealer Development Services Rewards Center A Powerful Go-to-Market Strate
Slide 34: The Industry is Evolving
The Industry is Evolving Consumer preferences are creating opportunities for innovation across the industry 75% 56% 75% Utilize digital channels as their Want to start negotiations Would buy a car online if they primary information source1 online2 could experience the car virtually3 Average # of vis
Slide 35: The Future of Mobility Services
The Future of Mobility Services Primary Model Today • OEMs design, manufacture and market • Dealers build and maintain customer relationships Current Model • Fleet providers are taxis, limos, rentals, etc. (est. 30% of sales) • Transacting in-store is still the norm • Heavy investment in personnel a
Slide 36: Ally Auto Adapting to the Future
Ally Auto Adapting to the Future Building Blocks as Leader in Point-of-Sale Auto Financial Services Trusted Advisor Market Leading Broad Originations Stable Funding Status Client Loyalty Holistic support to/from Expertise and quality of Large, long-term Leveraging bank deposit the industry; Successf
Slide 37: Dealer Financial Services: Insurance
Dealer Financial Doug Timmerman Services President, Insurance Ally Insurance 37
Slide 38: Ally Insurance Reinforces Dealer Relationships
Ally Insurance Reinforces Dealer Relationships Vehicle Service • Supplemental coverage to • F&I sales represent manufacturer’s warranty Contracts (VSCs) 25% of overall dealer gross profit • Covers borrower’s responsibility for the F&I Products Guaranteed Asset “gap” between amount owed and value • K
Slide 39: Business Focus
Business Focus • Focus on diversifying business mix • Introduced Ally Premier Protection, a new VSC product and system - Feedback on product and system is positive - Business is transitioning well • Momentum in developing new dealer relationships - New conquest volume in 2015 was greater than 2013 a
Slide 40: Underwriting and Servicing
Dealer Financial Mike Kane Services Vice President, Underwriting and Servicing Consumer Credit Operations 40
Slide 41: Disciplined and Analytical Risk Management
Disciplined and Analytical Risk Management • Retail / Lease • Credit Bureau Information Source • Prime / Non Prime • LTV Applications • New / Used • PTI Credit / Risk Models Risk & Pricing Models Credit Risk Ranking Approval / Qualify / Pricing Decision Decline (~30% Automatic Decision) (~16,000+ Pr
Slide 42: Measured Approach to Booking New Volume
Measured Approach to Booking New Volume Prime Approval Rates by Credit Tier Prime Book to Approve by Credit Tier 91.9% 90.9% 89.0% 89.0% 60.2% 86.9% 52.6% 74.0% 72.2% 49.8% 68.9% 66.5% 66.0% 45.9% 45.3% 44.3% 43.7% 39.5% 36.8% 35.3% 47.9% 48.3% 46.9% 45.0% 44.8% 35.7% 31.8% 33.4% 34.1% 28.4% 29.9% 2
Slide 43: Focus on Risk-Adjusted Returns
Focus on Risk-Adjusted Returns 2014 Full Year Total Retail Credit Volume Average Average Tier ($B) % Total Buy Rate NAALR FICO S $ 9.8 33% 2.66% -0.11% 777 A 11.0 37% 4.57% -0.68% 688 B 6.1 21% 8.04% -1.78% 647 C 2.4 8% 11.88% -2.61% 611 D 0.4 1% 16.30% -3.81% 575 Total $ 29.6 100% 5.46% -1.00% 700
Slide 44: SmartAuction Remarketing
Dealer Financial Steve Kapusta Services Vice President, SmartAuction Remarketing 44
Slide 45: SmartAuction
SmartAuction • Industry-leading wholesale internet auction launched in 2000 • Key component to leasing strategy and valuable risk management tool 45
Slide 46: SmartAuction Diversified Growth
SmartAuction Diversified Growth Diversified vehicles sold have increased 17% annually since 2004 Vehicles Sold on SmartAuction (Units in 000s) 434.9 441.4 411.9 398.5 369.7 378.5 356.8 334.8 343.8 327.3 321.0 302.5 263.3 220.7 150.4 33.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20
Slide 47: SmartAuction – Future Initiatives
SmartAuction – Future Initiatives q Continued Consignor Diversification - Leveraging key integration efforts q Consumer to Business Adaptation - Strategic partnerships with consumer facing platforms - Maximize Ally cross-sell opportunities and access to non-Ally customers q Multi-platform Bidding 47
Slide 48: SmartAuction Demonstration
SmartAuction Demonstration 48
Slide 49: Dealer Financial Services Summary
Dealer Financial Services Summary • Differentiated, market-leading auto financial services business • Relentless about taking care of the customer • Unique product capabilities to serve all of our customers’ needs • Ability to adapt to shifts in competitive environment, credit cycle, product mix and
Slide 50: Deposits and Consumer Products
Deposits and Consumer Diane Morais Products CEO and President, Ally Bank 50
Slide 51: Historical Challenges Became a Creative Opportunity
Historical Challenges Became a Creative Opportunity Financial turmoil created a business need • Lack of available funding in capital markets threatened company • Deposits business created to stabilize funding Unveiled an opportunity to reinvent banking • Consumer distrust of traditional banking mode
Slide 52: We Created a Bank That Put the Customer At the Center
We Created a Bank That Put the Customer At the Center Talk Straight Be Do Obviously Right Better 52
Slide 53: Ally Raised Customer Expectations
Ally Raised Customer Expectations • Intentionally designed every interaction to combine the best technologies with the best people ü Streamlined intuitive design ü Seamless banking across devices ü World-class customer service 24/7 • Delivered customer centric products and features that were unmatch
Slide 54: Consumers Shifting To Digital Banking
Consumers Shifting To Digital Banking Weekly Branch Users1 Weekly Mobile Banking Users2 2010 2010 333% 9% 60% 40% 2015 24% 2015 30% U.S. Domestic Branch Decline2 (000s) U.S. Direct Bank Retail Deposit Growth3 ($B) 100.2 $409 99.1 98.7 $377 97.9 96.9 $351 95.4 $325 94.0 $309 $276 $256 2009 2010 2011
Slide 55: Strong Growth While Improving Interest Expense
Strong Growth While Improving Interest Expense Grew to $55B While Reducing Interest Expense (Rate Paid) by 37% 55
Slide 56: Ally Bank Retail Deposit Growth Against Market
Ally Bank Retail Deposit Growth Against Market Outpaced Retail Deposit Market Growth By More Than 9X Ally Bank Retail Direct Bank Deposit Share Ally Bank Retail Deposit CAGR Direct Bank CAGR Retail Deposits CAGR Sources: FDIC National Information Center and SEC Filings 56
Slide 57: Customer Growth and Retention
Customer Growth and Retention Steady Customer Growth While Retaining >90% 1.1MM 910K 785K 625K 500K 390K 2010 2011 2012 2013 2014 2015 57
Slide 58: Ally: The Leading Direct Bank Franchise
Ally: The Leading Direct Bank Franchise 2015 Trend 2010 – 2015 Market Share of Direct Banks 13.1% 77% Deposit Customers 1.1MM 170% Retail Deposit Balances $55.4B 154% Active Online Customers 60% 192% Customer Retention 93% 90% Noninterest Cost of Deposits 0.49% 69% Interest Expense (Rate Paid) 1.14%
Slide 59: Our Customers Are Advocates
Our Customers Are Advocates Source: 2015 Ally Bank Customer Forum Loyalty Survey 59
Slide 60: Consistently Recognized as an Industry Leader
Consistently Recognized as an Industry Leader 60
Slide 61: Industry awards and recognition
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Slide 62: 5.5 Million Customers to Drive Growth
5.5 Million Customers to Drive Growth Diversified Customer Base Open to a Broader Relationship Why Millennials Millennials 24% Matter • 47% of new Bank customers Gen X 33% - 34% are affluent • $200 billion annual spending1 • Financial assets projected to grow Boomers 34% 15% annually2 - $1.4 trillio
Slide 63: Expanding Franchise, Leveraging Customer Base
Expanding Franchise, Leveraging Customer Base Product Expansion Guided By Three Simple Principles Customer ü Gauge customer demand for a new Ally product or service Opportunity ü Total market potential and Ally’s ability to differentiate within the segment ü Diversify revenue over time Drive Shareho
Slide 64: Ally Bank Credit Card
Ally Bank Credit Card Credit Cards are a Highly Valued Component of a Consumer’s Banking Relationship 85% 12% 30% existing Ally customers existing customers opening new average consumer currently use credit cards1 credit card in next 2 years1 credit card utilization2 average number of credit affluen
Slide 65: The Mortgage Opportunity
The Mortgage Opportunity Largest Portion of Household Debt, Mortgage is a Natural Next Step for Ally $8.3 Trillion 70% 90% U.S. consumer Ally customers own homes Ally customers are prime mortgage debt balance1 or soon will Ally customers in Home buyers are >10% market annually >30% millennials2 • Co
Slide 66: Mortgage – Customer Origination Strategy
Mortgage – Customer Origination Strategy 1 Direct to Consumer mortgage originations 2 Conforming loans, including servicing rights, sold to private label supplier 3 High-quality jumbo loans retained on Ally’s balance sheet Dedicated to Limiting Risk While Advancing Strategic Priorities ü Establish h
Slide 67: Summary
Summary • Well-positioned leading online bank with momentum • Ally is aligned with consumer market trends – convenient, transparent and digital • Attractive and growing customer base • Product expansion in 2016 – low risk, modest revenue near-term • Creating foundation and optionality for future gro
Slide 68: Risk Management
Risk Management Dave Shevsky Chief Risk Officer 68
Slide 69: Enterprise Risk Management – Overview
Enterprise Risk Management – Overview Provide independent view of risk to maintain profitability, strong capital and liquidity through the cycle Highlights Key Aspects of Ally’s Risk Appetite and Culture Independence Prudent risk Minimize taking to exposure to generate certain risks, Nearly 100 year
Slide 70: Risk Management Transformation
Risk Management Transformation Legacy (Pre-BHC) Current • Decentralized • Centralized scorecard development and implementation • Pricing based on • Data driven risk-adjusted probabilities Underwriting “averages” • Focus on layered (multidimensional) risk / Collections • Limited segmentation • Granul
Slide 71: Ally's Three Lines of Defense
Ally’s Three Lines of Defense (LoD) Grounded in Three Lines of Defense to ensure risk and reward tradeoff is properly identified, measured and managed Internal Audit • Verify the effectiveness of 3rd Line of Defense risk management practices Risk Management “Assurance” and internal control • Program
Slide 72: Ally's Risk Management Processes
Ally’s Risk Management Processes Risk management is integrated in the day-to-day business operations but also serves as an important independent check and balance Risk: Enterprise Risk: • New Product Assessments/Approval • Stress Testing & Scenario Analysis • Setting Credit Policy • Economic Capital
Slide 73: Ally's Credit Risks
Ally’s Credit Risks Low loss, short duration balance sheet minimizes volatility through cycles Portfolio 2015 2015 Asset Class (12/31/15) NCL% NCL $ Total Loan $112B 58 bps $609 mm Portfolio • Retail auto net charge-offs expected to increase 10-15 bps in 2016 Retail Auto $64B 95 bps $578 mm • Stress
Slide 74: Lease Residual Risk
Lease Residual Risk Lease residual risk declining significantly • Ally has unique capabilities to manage the lease portfolio - Independent residual analysis team – not reliant on Automotive Lease Guide - Residual setting process is much more advanced and portfolio mix is better positioned to withsta
Slide 75: Used Vehicle Pricing
Used Vehicle Pricing Exposure to used vehicle prices declining as lease portfolio shrinks • Used car prices have performed better than Ally expectations - Increase in demand (unemployment picture) has offset increasing used vehicle supply • Ally forecasts ~5% decline in used car prices per year over
Slide 76: Regulatory Oversight
Regulatory Oversight In addition to internal risk management and governance, Ally is subject to regulatory examinations and oversight by the Federal Reserve, FDIC, UDFI and state agencies • CCAR stress test provides a detailed assessment of Ally’s risk management and capital adequacy processes, both
Slide 77: Perspective on Auto Cycle
Perspective on Auto Cycle • Pent up demand combined with Loans outstanding increasing out of crisis favorable consumer fundamentals 20% Vehicle Loans Outstanding, Y/Y% - All-time high average vehicle age 15% 10% • Healthy consumer 5% - Stable to improving wages and 0% employment -5% -10% - Low gas p
Slide 78: Risk Management: Consumer Automotive Credit Risk
Risk Management Steve Merritt Consumer Automotive Chief Risk Officer, Credit Risk Consumer Auto 78
Slide 79: Consumer Auto Lending Philosophy
Consumer Auto Lending Philosophy ü Extend credit to consumers with the willingness and ability to pay ü Utilize wealth of historical data to drive statistically sound risk-based pricing decisions ü Strive to get as granular as practical ü Avoid adverse selection ü Monitor performance real-time to un
Slide 80: Retail Auto Historical Losses
Retail Auto Historical Losses Variation in losses highly correlated with the change in the unemployment rate 2.50% 4.0% 3.0% Annualized Net Credit Losses Unemployment (Y-Y Change) 2.00% 2.0% 1.0% 1.50% 4Q 2015 coverage rate = 1.30% 0.0% -1.0% 1.00% -2.0% -3.0% 0.50% -4.0% 0.00% -5.0% 1 4 7 1 4 7 1 4
Slide 81: Priced Loss Assumptions
Priced Loss Assumptions • Expected net losses incorporated in profitability analysis at time of origination at granular level and tracked at every aging point over the loan life • Loss assumption segmentation includes numerous finely sliced variables resulting in thousands of segments - Proprietary
Slide 82: Prudent Credit Expansion
Prudent Credit Expansion • Ally has modestly expanded lending into higher yielding assets while limiting exposure to deeper subprime - Shifting from low yielding super prime loans to more prime and near prime assets Distribution of Expected Losses – NAALR 45% 40% 35% % of Total Retail Origination 30
Slide 83: Non Prime
Non Prime • Modest YoY increase primarily driven by new scorecards (better risk ranking) • Unique underwriting and collections policies, processes and teams: - FICO floor has remained unchanged since 2012 - No 84 month term - More stringent underwriting criteria (e.g., LTV, PTI, DTI, mileage, max am
Slide 84: 84 Month Term
84 Month Term While the auto industry has been migrating to longer terms, Ally places tighter policy parameters on extended term loans to mitigate risk • Board established origination limits and tighter underwriting parameters - Only available to Ally’s top three credit tiers (709 WA FICO) - More st
Slide 85: Financial Overview and Outlook
Financial Overview Chris Halmy and Outlook Chief Financial Officer 85
Slide 86: Financial Profile Highlights
Financial Profile Highlights • Clean, low loss, short duration balance sheet • Strong capital, subject to rigorous internal and external stress testing • Generating capital through earnings as well as DTA utilization • Conservative liquidity posture to ensure business continuity through market disru
Slide 87: Summary of Financial Targets
Summary of Financial Targets 2015 2016 Target Long-Term Core ROTCE1 9.4% 10.0% 12.0% Adjusted EPS $2.00 / 19% 15% +/- 15% +/- Growth1 Adjusted Efficiency Ratio1 Mid-40% Mid-40% Low-40% Adjusted TBV per Share1 Growth $24.6 / 8.5% 9-10% 10% +/- Dividend Yield N/A 1-2% 2-3% Deposits as % of 47% 50-55%
Slide 88: Tangible Drivers of 15% +/- EPS Growth
Tangible Drivers of 15% +/- EPS Growth • $170 million lower preferred dividends • Growing net interest income 2016 Earnings Per • Partially offset by: Share Growth - Higher provision expense on retail loan growth - Non-recurring 2015 positive items • Share repurchases • Continued “Regulatory Normali
Slide 89: Capital Structure
Capital Structure • Ally has made substantial progress normalizing the capital structure • Series G redemption in 2015 positions Ally to distribute common capital in 2016 2009 Pro Forma 2016 Tier 2 & Other Tier 2 & 9% Other Trust 13% Preferred Common 10% Capital Trust 31% Preferred 12% Other Common
Slide 90: Capital Allocation
Capital Allocation • Capital generation through earnings and DTA utilization will substantially outpace RWA growth, leading to additional excess capital • Common Equity Tier 1 target of ~9.0% based on Ally risk profile ~12% Growth Common Disallowed Net Income Equity $11.9B1 ~$1B + DTA Utilization ~$
Slide 91: Capital Allocation Hurdle Rates
Capital Allocation Hurdle Rates • Continually evaluate capital allocation alternatives to maximize shareholder value creation • Will prioritize share repurchases over balance sheet growth given current valuation - Would require a return on capital in excess of 17% to achieve EPS impact of share repu
Slide 92: Deferred Tax Asset
Deferred Tax Asset • Deferred tax assets significantly reducing Disallowed DTA Balance cash taxes paid through 2018 ($ millions) - Expect to fully utilize NOLs in 2018 $1,220 $1,128 $1,100 - Exploring opportunities to utilize Foreign Tax $980 $952 Credits currently with Valuation Allowance • Increme
Slide 93: Building Tangible Book Value
Building Tangible Book Value Focused on protecting and growing book value per share over time Adjusted Tangible Book Value per Share ~$29 ~$27 $24.60 $19.95 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q16 4Q17 2013 2015 GAAP Equity $14,208 $ 13,439 Less: Preferred Equity (1,255) (696) Less: Goodwi
Slide 94: Earning Asset Trajectory
Earning Asset Trajectory • Auto Finance assets expected to grow modestly in 2016 • Growth primarily driven by less capital intensive, higher ROE assets FY 2015 $ billion Balance Avg. Yield 2016 Expectations Retail Auto Loan $64 5.1% Retail growth offsets lease decline Commercial Auto $35 2.9% Expect
Slide 95: Earning Asset Yields
Earning Asset Yields Attractive asset yields relative to risk profile of the balance sheet 7.2% 4.3% 3.8% 3.4% 3.4% 3.4% 3.2% 3.2% 3.2% 3.1% 2.8% 2.5% Source: 2015 full year company filings 95
Slide 96: Funding Mix
Funding Mix • Growth in deposit funding will continue to drive cost of funds improvement • ~$15 billion of total available liquidity - Subject to internal and external stress testing 2015 Funding Profile Targeted Long-Term Funding Profile Average Cost of Funds FHLB 0.9% Deposits 1.1% Other Secured 1
Slide 97: Trajectory to Investment Grade Ratings
Trajectory to Investment Grade Ratings • Priority to achieve Investment Grade rating Current Ratings • Strong momentum in 2015 with S&P moving to Positive Unsecured Outlook and DBRS upgrading to BB (High) Agency Ratings Outlook • Ally’s financial profile is already indicative of an Investment S&P BB
Slide 98: Ally Bank Funding
Ally Bank Funding • Targeted increase to over 90% bank funding would align Ally with peers and represents additional earnings opportunity • Ally expects to fund ~85% of originations at Ally Bank in 2016 Total Assets Funded at Ally Bank (billions) $158.6 $151.2 $151.6 • Auto Loans – 18% 30% • Auto Le
Slide 99: Long-Term Funding Opportunity
Long-Term Funding Opportunity • Opportunity to continue to reduce unsecured debt footprint over time • Unsecured debt levels are the result of legacy operations • Approximately $13 billion of maturities through 2020 with minimal expected refinancing • Continue to assess liability management relative
Slide 100: Interest Rate Risk
Interest Rate Risk • Ally’s baseline projections based on market forward curve, which assumes an additional 50 basis point Fed Funds increase by year-end 2016 • Ally’s interest rate risk position is relatively neutral - Net financing revenue benefits from recent market bias towards slower Fed Funds
Slide 101: Expense Overview
Expense Overview Significant Expense Reductions Additional Reinvestment in 2016 (billions) $85MM $40MM IT Projects Ally 2.0 $2.1 $20MM $15MM $1.9 Ally Auto Advantage Info Security $1.8 ~$1.8 2013 2014 2015 2016 Controllable Expenses $12MM $5MM CF & Mortgage SmartAuction Adjusted Efficiency Ratio1 ex
Slide 102: Segment Realignment
Segment Realignment • Realignment will provide transparency for Ongoing Mortgage and Corporate Finance segments • Timing: 1Q16 Earnings Current New Automotive Finance Automotive Finance Insurance Insurance Mortgage Mortgage - Ongoing Split from Mortgage Corporate and Other Corporate Finance Remove f
Slide 103: Financial Overview Summary
Financial Overview Summary • Achievable financial targets to drive shareholder value • Focus on efficient capital allocation • DTA utilization drives incremental capital for deployment • Strong, flexible funding profile with little need to access unsecured debt markets • Long-term runway for reducin
Slide 104: Ally Brand and Customer Approach
Ally Brand and Andrea Riley Customer Approach Chief Marketing Officer 104
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Slide 112: And we didn't just solve for customer pain points
AND WE DIDN’T JUST SOLVE FOR CUSTOMER PAIN POINTS.
Slide 113: We built innovations to better serve the customer
KEEP YOUR EVERYDAY GROW VOLIR SAVINGS \ WE BUILT INNOVATIONS TO BETTER SERVE THE CUSTOMER AHEAD.
Slide 114: Our brand became our promise
OUR BRAND BECAME OUR PROMISE: TO BE AN ALLY TO OUR CUSTOMERS { i}
Slide 115: Strong brands reach greatness
STRONG BRANDS REACH GREATNESS O fhe? Google BE Microsoft S&S © TARGET S atat amazon Youetita” ~T 115 NETFLIX
Slide 116: BCG Up and Coming Brands to Watch 2015
BCG THE Boston Consuttinc Group UP AND COMING BRANDS TO WATCH 2015 we ME] Asien if hulu © & LQ OWe «fitvit 116
Slide 117: Strong and consistent momentum
STRONG AND CONSISTENT MOMENTUM ALL WHILE BEING OUTSPENT BY X THE CATEGORY.
Slide 118: Outperforming the banking category
OUTPERFORMING THE BANKING CATEGORY AGAIN AND AGAIN BOLD TRENDSETTER RECOMMEND CREDIBLE LIKEABILITY TO FRIEND OR FAMILY ePoll Study. Drivers of Brand, Nov. 2015
Slide 119: Awards and recognition
MONEY MAGAZINE “BEST ONLINE BANK” ® 2011-2015 2014 Auto Finance Excellence AUTO FINANCE NEWS AUTO FINANCE EXCELLENCE AWARD Award MONEY SMART WEEK 2015 STRATEGIC PARTNER MONEY @) SMART IWS, WEEK ‘Apa 18-25, 2015 | MONEYSMARTWEEK.ORG KIPLINGER'S “BEST ONLINE BANK” 2014, 2015 Kiplinger's: PERSONAL Mi F
Slide 120: Our fans and followers are our best digital advocates
OUR FANS AND FOLLOWERS ARE OUR BEST DIGITAL ADVOCATES Aa lla a <¥ 2B Follow @keykeydoodle Yay Keydra! The online bank | love is @AllyBank . Good rates, good customer service & easy to use website #LiveRicherChallenge Daniel Lawler {x 2 Follow Dognettos Big thanks to @AllyAuto got paid to return my v
Slide 121: Customers sell us to other customers
ALLY IS THERE FOR THE AUTOMOTIVE PEOPLE. IF IT HADN'T BEEN FOR ALLY, | WOULDN'T HAVE BEEN ABLE TO EXPAND. -TOM DURANT ALLY IS THE CLOSEST WE WILL GET TO PERFECT -INDER DOSANJH THESE GUYS COME UP AND THEY ACTUALLY CARE AND THEY’RE INTERESTED IN US AS PEOPLE. NOT JUST AS BUSINESS. AND THAT MAKES A BIG
Slide 122: Customer Video
CUSTOMER VIDEO 122
Slide 123: Strong business growth
*STRONG BUSINESS GROWTH *ENGAGED BASE OF CUSTOMERS *NEW PRODUCT LAUNCHES *YOUNGER CUSTOMERS TO OUR BRAND <=
Slide 124: Emotion in an emotionless category
*EMOTION IN AN EMOTIONLESS CATEGORY *REFRAMED THE SERVICE CONVERSATION *CHALLENGED CONVENTIONAL THINKING o\ ax Ny
Slide 125: Marketing as a catalyst
MARKETING AS A CATALYST A STRAIGHTFORWARD \__ BANK THAT DOES RIGHT BY YOU AND YOUR MONEY
Slide 126: Unleashing a fully integrated financial services company
UNLEASHING A FULLY INTEGRATED FINANCIAL SERVICES COMPANY fer MORTGAGE vp DEALER ee AUTOMOTIVE SERVICES DEPOSITS Ww CORPORATE aA FINANCE one’ AUTO FINANCE 126
Slide 127: Building dealers' brands
OUR BRAND |S BUILDING DEALER'S BRANDS a
Slide 128: Driven nearly million leads back to dealers
IN THE LAST TWO YEARS WE'VE DRIVEN NEARLY 1 MILLION LEADS BACK TO DEALERS ally — -_ 7 === 10,000 fj Dp 7 Et my ] - Ten thousand dollars and 2/100 L/h/ VELEN : _ pea REPUTATION + SOCIAL MEDI
Slide 129: Continue to obsess over our customers
CONTINUE TO OBSESS OVER OUR CUSTOMERS PROSPECT MARKETING CUSTOMER & Early Upsell Email RETENTION = & WINBACK Anniversary Email Loyalty & Rewards Triggered Balance Build DM ——s| Authenticated Banners My Ally Update aE Social Media Banners ENGAGEMENT Access to Free FICO* Score =a Targeted Landing Page
Slide 130: Retaining at captive-like levels
RETAINING AT CAPTIVE-LIKE LEVELS S OEM LOYALTY SCORE = = 100 —— _ 80 ome 72 71 40 20 0 7 NEW VEHICLE PURCHASERS CAPTIVE NON-CAPTIVE WHO FINANCED WITH A... LENDER LENDER © GfK FEBRUARY 2016. CONSUMER LOYALTY IN THE AUTOMOTIVE MARKET \| 130
Slide 131: Constantly pushing our levels of digital sophistication
CONSTANTLY PUSHING OUR SWEVEESOF DIGITAL SOPHISTICATION
Slide 132: Whenever, wherever, however
WHENEVER, WHEREVER, HOWEVER.
Slide 133: Disruptor
DISRUPTOR ALLY RELENTLESS‘
Slide 134: Relentless Video
RELENTLESS VIDEO 134
Slide 135: Appendix
Appendix 135
Slide 136: Notes on non-GAAP and other financial measures
Notes on non-GAAP and other financial measures ($ in millions, unless noted otherwise) 2015 2014 Core ROTCE Calculation Pre-tax income (loss) from continuing operations $ 1,393 $ 1,246 Add: Core original issue discount expense 59 186 Repositioning items 349 187 Core pre-tax income $ 1,801 $ 1,619 No
Slide 137: Notes on non-GAAP and other financial measures
Notes on non-GAAP and other financial measures ($ in millions, unless noted otherwise) 2015 2014 Adjusted Tangible Book Value ($ billions) GAAP shareholder's equity $ 13.4 $ 15.4 Preferred equity and goodwill (0.7) (1.3) Tangible common equity $ 12.7 $ 14.1 Tax-effected bond OID (tax rate of 34%) (0
Slide 138: Notes on non-GAAP and other financial measures
Notes on non-GAAP and other financial measures 1) Core pre-tax income (loss) is a non-GAAP financial measure. It is defined as income (loss) from continuing operations before income tax expense and primarily bond exchange original issue discount ("OID") amortization expense. 2) Repositioning items a
Slide 139: Ally Unsecured Debt Securities
Ally Unsecured Debt Securities Ally Unsecured Debt Securities (as of 12/31/2015) Principal Amount Coupon Maturity Date Outstanding Debt Type 3.125 1/15/2016 $500,000,000 Senior FRN 7/18/2016 $375,000,000 Senior 3.500 7/18/2016 $1,000,000,000 Senior 2.750 1/30/2017 $1,000,000,000 Senior 5.500 2/15/20