Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q3 2020 Earnings Presentation
37 slides from Ally Financial's earnings presentation, Oct 16, 2020
Slide 1: Ally Financial Inc. 3Q 2020 Earnings Review
Ally Financial Inc. 3Q 2020 Earnings Review October 16, 2020 3Q 2020 Preliminary Results Contact Ally Investor Relations at (866) 710-4623 or investor.relations@ally.com 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: GAAP and Core Results: Quarterly
GAAP and Core Results: Quarterly ($ millions except per share data) 3Q 20 2Q 20 1Q 20 4Q 19 3Q 19 GAAP net income (loss) attributable to common shareholders (NIAC) $ 476 $ 241 $ (319) $ 378 $ 381 Core net income (loss) attributable to common shareholders (1)(2) $ 473 $ 228 $ (166) $ 364 $ 396 GAAP e
Slide 4: 3Q 2020 Highlights
3Q 2020 Highlights Consistent prioritization of our employees, our customers and our communities > Adjusted EPS(1) of $1.25 | Core ROTCE(1) of 15.2% | Highest quarterly levels on record ▪ Adjusted total net revenue(1) of $1.68 billion, up 4% YoY | Solid asset quality performance across all portfolio
Slide 5: Ally's Sustainable Competitive Advantage
Ally’s Sustainable Competitive Advantage Auto & Insurance: Established, Market-leading Capabilities Full-Market Reach Across Growing Dealer Base Tech, Digital Tools & Data Analytics Established & Emerging Players | Franchised & Independent Modern Servicing System | Digital, Self-service Portals Dyna
Slide 6: Ally's Customer Evolution
Ally’s Customer Evolution 10-Years of Customer Growth Ally’s Growing Customer Base 8.5M+ Ally Bank Customer Trends Retail Deposit Customers % Multi-Product Customers 2.2M 2.0M customers 7% 1.2M 6% # of Customers 4.5M 0.8M 0.4M <1% Auto 2010 2013 2016 2019 3Q 2020 Note: Multi-product Customers repres
Slide 7: Core Metric Trends
Core Metric Trends Adjusted Earnings Per Share(1) Adjusted Total Net Revenue(2) ($ millio ns) $1.25 $0.97 $1.01 $0.95 $1,680 $0.91 $0.92 $1,620 $1,622 $1,606 $0.83 $0.80 $1,556 $1,535 $1,557 $0.65 $0.70 $0.68 $1,521 $1,528 $471 $0.61 $1,480 $1,492 $1,463 $1,471 $424 $458 $393 $451 $393 $392 $396 $38
Slide 8: Recent Trends: Auto
Recent Trends: Auto Consumer Auto: Decisioned Applications Consumer Auto: Originations New Apps: YoY change Used Apps: YoY change Consumer Auto Originations ($B) 25% $4.0 10% $3.0 (5%) $2.0 (20%) (35%) $1.0 (50%) $- Jan Feb Mar Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep Note: Consum
Slide 9: Recent Trends: Deposit & Consumer Offerings
Recent Trends: Deposit & Consumer Offerings Retail Deposit Growth Retail Deposit Customers ($ billions) (# thousands) 2,211 $4.0 $3.0 $2.0 1,992 $1.0 $0.0 1Q'20 Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep Ally Home: Direct-to-Consumer Originations Ally Invest ($ millions) ($ billions
Slide 10: Strong Balance Sheet Foundation
Strong Balance Sheet Foundation Funding Liquidity (1) ($ billions) Deposits Secured Debt FHLB / Other Unsecured Debt (2) Highly Liquid Securities Cash & Equivalents Unused Capacity 15% 13% 9% 8% 7% 7% $44.2 14% 12% 4% 9% 13% 6% $1.4 13% 12% 22% $28.6 $19.3 $21.8 $21.1 $2.0 $17.1 $3.2 74% 82% $5.1 $2
Slide 11: 3Q 2020 Financial Results
3Q 2020 Financial Results ($ millions; except per share data) Increase / (Decrease) vs. 3Q 20 2Q 20 3Q 19 2Q 20 3Q 19 (1) Net financing revenue (excluding Core OID) $ 1,209 $ 1,063 $ 1,195 $ 146 $ 14 Core OID (9) (9) (7) (0) (2) Net financing revenue (as reported) $ 1,200 $ 1,054 $ 1,188 $ 146 $ 12
Slide 12: Balance Sheet & Net Interest Margin
Balance Sheet & Net Interest Margin ($ millions) 3Q 20 2Q 20 3Q 19 Average Average Average Balance Yield Balance Yield Balance Yield Retail Auto Loan $ 72,999 6.56% $ 72,262 6.48% $ 73,162 6.66% Retail Auto Loan (excl. hedge impact) 6.83% 6.77% 6.66% Auto Lease (net of depreciation) 9,317 7.89% 9,06
Slide 13: Deposits
Deposits • Deposits of $134.9 billion, up $15.7 billion or 13% YoY Retail Deposit Balances – Retail deposits of $120.8 billion, up $5.0 billion QoQ, highest 3rd quarter growth ($ billions, EoP) Retail Brokered / Other Customer Retention Rate – Steady customer retention rate of 96% $131.0 $134.9 $120
Slide 14: Capital Ratios & Shareholder Distributions
Capital Ratios & Shareholder Distributions • Preliminary 3Q 2020 CET1 ratio of 10.4% Capital Ratios and Risk-Weighted Assets – Elevated capital position reflects higher earnings, lower commercial floorplan balances and suspension of share 14.1% 13.8% repurchase program 12.8% 12.8% 12.8% 12.1% 11.9%
Slide 15: Asset Quality: Key Metrics
Asset Quality: Key Metrics Consolidated Net Charge-Offs Net Charge-Off Activity Allowance as % of Annualized NCOs Annualized NCO Rate ($ millions) 550% 500% Net Charge-Offs 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 3Q 20 450% 0.91% Retail Auto $ 172 $ 253 $ 271 $ 262 $ 137 $ 117 400% 0.85% 0.83% 0.84% 350% 0.73
Slide 16: Asset Quality: Coverage & Reserves
Asset Quality: Coverage & Reserves • Expect full-year 2020 retail auto net-charge-offs < 1.2% Consolidated Coverage Ratio Retail Auto Coverage Ratio ($ billions) Reserve - $ Reserve - % ($ billions) Reserve - $ Reserve - % 4.09% 4.06% 2.85% 2.87% 3.91% 2.54% 3.34% 2.03% 0.99% 0.99% $2.8 $3.0 $3.0 $3
Slide 17: Auto: COVID-19 Deferral Program Update
Auto: COVID-19 Deferral Program Update • Ally provided COVID-19 assistance to ~30% or ~1.3M consumer auto accounts | ~99% expired as of 9/30/20 • Customer Engagement: Rolled out enhanced digital portal & new communication technology during 3Q • Preparedness: Ongoing utilization of scalable staffing
Slide 18: Auto Finance
Auto Finance • Pre-tax income of $566 million, up $137 million YoY and up $237 million QoQ Increase/(Decrease) vs. Key Financials ($ millions) 3Q 20 2Q 20 3Q 19 Net financing revenue $ 1,102 $ 113 $ 24 – Net financing revenue up YoY and QoQ due to higher gains Total other revenue 61 21 2 on off-leas
Slide 19: Auto Finance Key Metrics
Auto Finance Key Metrics Consumer Originations Consumer Origination Mix ($ billions; % of $ originations) (% of $ originations) 685 688 691 686 685 687 $9.7 $9.3 $9.8 50% 49% $9.1 54% 55% 60% 55% $8.1 $7.2 50% 46% 50% 44% 50% 11% 14% 14% 50% 13% 14% 12% 25% 28% 29% 26% 29% 35% 36% 37% 31% 28% 32% 28
Slide 20: Insurance
Insurance • Pre-tax income of $78 million, up $22 million YoY Increase/(Decrease) vs. and down $50 million QoQ Key Financials ($ millions) 3Q 20 2Q 20 3Q 19 – Results positively impacted by realized and unrealized Premiums, service revenue earned and other $ 279 $ 13 $ (4) gains on equity securities
Slide 21: Corporate Finance
Corporate Finance • Pre-tax income of $60 million, up $16 million YoY and Increase/(Decrease) vs. up $28 million QoQ Key Financials ($ millions) 3Q 20 2Q 20 3Q 19 Net financing revenue $ 75 $ (2) $ 15 – Net financing revenue increase YoY reflects higher loan Adjusted total other revenue (1) 8 3 (2)
Slide 22: Mortgage Finance
Mortgage Finance • Pre-tax income of $26 million, up $15 million YoY Increase/(Decrease) vs. and up $18 million QoQ Key Financials ($ millions) 3Q 20 2Q 20 3Q 19 – Net financing revenue declined YoY reflecting ongoing Net financing revenue $ 30 $ - $ (9) elevated prepayment activity Total other reve
Slide 23: Strategic Priorities
Strategic Priorities Relentless Customer Focus and ‘Do It Right’ Culture Leading, adaptable Auto & Insurance businesses Lending and digitally-based Ally Bank platform Consumer & Commercial Ongoing customer growth & relationship Savings & deepening across scalable platforms Insurance Checking Acceler
Slide 24: Supplemental
Supplemental 3Q 2020 Preliminary Results 24
Slide 25: Results by Segment
Supplemental Results by Segment Pre-Tax Income ($ millions) 3Q 20 2Q 20 3Q 19 Automotive Finance $ 566 $ 329 $ 429 Insurance 78 128 56 Dealer Financial Services $ 644 $ 457 $ 485 Corporate Finance 60 32 44 Mortgage Finance 26 8 11 Corporate and Other (98) (160) (40) Pre-tax income from continuing op
Slide 26: Funding
Supplemental Funding • Ally’s deposit portfolio growth has consistently reduced reliance on wholesale funding markets Ally Financial Ratings Details LT Debt ST Debt Outlook Date – In Sep-20, Ally paid down $2.5 billion of fixed rate FHLB borrowings at a weighted average coupon of ~2.8% Fitch BBB- F3
Slide 27: Corporate and Other
Supplemental Corporate and Other • Corporate and Other includes impact of Increase/(Decrease) vs. centralized asset & liability management, Key Financials ($ millions) 3Q 20 2Q 20 3Q 19 corporate allocation activities, legacy mortgage Net financing (loss) $ (15) $ 39 $ (12) portfolio, Ally Invest an
Slide 28: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impacts (1): Baseline vs. Forward Curve 3Q 20 2Q 20 ($ millions) Gradual (2) Instantaneous Gradual (2) Instantaneous -25 bps (3) $ (1) $ (36) n/a n/a +100 bps $ 88 $ 181 $ 66 $ 98 Stable rate environment n/m $ 3 n/m $ (3) (1) Net financing
Slide 29: Deferred Tax Asset
Supplemental Deferred Tax Asset Deferred Tax Asset / (Liability) 3Q 20(1) 2Q 20(1) ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Net Operating Loss (Federal) $ 7 $ - $ 7 $ 7 Tax Credit Carryforwards 1,835 (750) 1,085 956 State/Local Tax Carryfor
Slide 30: 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 31: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures 11) Estimated Retail Auto Originated Yield is a forward-looking non-GAAP financial measure determined by calculating the estimated average annualized yield for loans originated during the period. At this time there currently is no comparabl
Slide 32: GAAP to Core Results: Adjusted EPS - Quarterly
Supplemental GAAP to Core Results: Adjusted EPS - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 3Q 20 2Q 20 1Q 20 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 Numerator ($ millions) GAAP net income (loss) attributable to common shareholders $ 476 $ 241 $ (319)
Slide 33: GAAP to Core Results: Adjusted TBVPS - Quarterly
Supplemental GAAP to Core Results: Adjusted TBVPS - Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 3Q 20 2Q 20 1Q 20 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 Numerator ($ billions) GAAP common shareholder's equity $ 14.1 $ 13.8 $ 13.5 $ 14.4 $
Slide 34: GAAP to Core Results: Core ROTCE - Quarterly
Supplemental GAAP to Core Results: Core ROTCE - Quarterly Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 3Q 20 2Q 20 1Q 20 4Q 19 3Q 19 Numerator ($ millions) GAAP net income (loss) attributable to common shareholders $ 476 $ 241 $ (319) $ 378 $ 381 Discontinued operations, net
Slide 35: GAAP to Core Results: Adjusted Efficiency Ratio - Quarterly
Supplemental GAAP to Core Results: Adjusted Efficiency Ratio - Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 3Q 20 2Q 20 1Q 20 4Q 19 3Q 19 Numerator ($ millions) GAAP noninterest expense $ 905 $ 985 $ 920 $ 880 $ 838 Insurance expense (268) (322) (256) (238) (247) Repositioning items - (50) -
Slide 36: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures ($ millions) 3Q 20 2Q 20 3Q 19 Change in the Change in the Change in the fair value of fair value of fair value of GAAP Core OID Repositioning Non-GAAP (1) GAAP Core OID Repositioning Non-GAAP (1) GAAP Core OID Repositioning Non-GAAP (1) eq
Slide 37: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures Net Financing Revenue (ex. Core OID) QUARTERLY TREND ($ millions) 3Q 20 2Q 20 1Q 20 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 GAAP Net Financing Revenue $ 1,200 $ 1,054 $ 1,146 $ 1,156 $ 1,188 $ 1,157 $ 1,132 $ 1,140 $ 1,1