Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q3 2010 Earnings Presentation
43 slides from Ally Financial's earnings presentation, Nov 3, 2010
Slide 1: Ally Financial Inc. 3Q10 Earnings Review
Ally Financial Inc. 3Q10 Earnings Review November 3, 2010 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 The following should be read in conjunction with the financial statements, notes and other information contained in the Company’s 2009 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. This information i
Slide 3: Third Quarter Highlights
Third Quarter Highlights Ally earned core pre-tax income (1) of $636 million and net income of $269 million in the third quarter Premier Auto Finance Provider Access Capital Markets Improve Cost Structure Franchise momentum continues with 48% year-over-year growth in consumer originations Maintained
Slide 4: Results by Segment
Results by Segment All four operating segments were profitable for the third straight quarter Strong loan originations Stable core business trends Results impacted by auto balance sheet repositioning and mortgage repurchase reserve expense Ally Bank and ResCap legal entities continued to be profitab
Slide 5: Leading Auto Finance Franchise
Leading Auto Finance Franchise Established leader in floorplan finance Increased diversification as an independent market driven competitor Originations and market share continue positive momentum Fragmented used market presents a growth opportunity U.S. Consumer Auto Originations ($ billions) Sourc
Slide 6: Success is Driven by Strong Dealer Relationships
Success is Driven by Strong Dealer Relationships 90 years of understanding and serving dealer needs Floorplan lending and broad product offerings serve as strong foundation for deep dealer relationships Bank holding company structure provides added stability and cost-efficient funding Market leading
Slide 7: Retail Bank Franchise
Retail Bank Franchise Ally Bank offers a differentiated banking experience Ally competes with a differentiated, customer-centric offering, tuned to the way customers want to bank today Brand: Talk Straight, Do Right and Be Obviously Better Differentiated Customer Experience: Accessible 24/7, Easy to
Slide 8: Reducing Mortgage Balance Sheet Risk
Reducing Mortgage Balance Sheet Risk Strategic review is complete Balance sheet has been substantially de-risked Remaining mortgage assets are largely: Non-economic exposures Assets supporting agency origination and servicing business Bolstered repurchase reserves and have completed settlements with
Slide 9: Foreclosure Process Timeline
Default (2) Initiate Foreclosure Process Filing (3) Court Approval (3) Title Transfer Property Repossession REO Marketing and Sale Customer Outreach Borrower in Home Homeownership Preservation Efforts 265 days 180 – 270 days (1) Day counts represent GMAC Mortgage national average (2) Default reached
Slide 10: Foreclosure Process Update
Foreclosure Process Update Changes have been made to the internal process, which include: All employees with responsibility for signing documents have undergone additional education and training The number of employees performing this process has been substantially increased A more robust policy on
Slide 11: Third Quarter 2010 Results
Third Quarter 2010 Results Mortgage repurchase reserve expense: $344 Key Statistics ($ millions) 3Q 10 2Q 10 3Q 09 2Q 10 3Q 09 Total net revenue (ex. OID) 2,361 $ 2,392 $ 2,281 $ (31) $ 80 $ Provision for loan losses 9 220 680 (211) (671) Controllable expenses (1) 840 841 986 (1) (146) Other noninte
Slide 12: Earnings Analysis
Earnings Analysis Recent financial results have been affected by several items, which are expected to moderate over the coming quarters Over time, Ally expects profitability to improve from the near term run rate as cost of funds declines and portfolio mix is optimized ($ millions) 3Q 10 2Q 10 1Q 10
Slide 13: Balance Sheet Repositioning
Balance Sheet Repositioning Repositioning of the auto balance sheet is impacting financial results: Higher quality, lower yielding originations, particularly in 2009 Lease portfolio runoff with all time high used car values is resulting in meaningful gains to book value More assets held for investme
Slide 14: High Quality Balance Sheet
High Quality Balance Sheet Liquid Assets ($ millions) Total % of Total Comments Cash and Cash Equivalents 12,589 $ 7.3% Conservative liquidity posture Investment and Trading Securities 12,136 7.0 24,725 14.3 Loan and Lease Assets Retail Auto (HFI and HFS) 47,143 27.2 1.20% annualized credit losses C
Slide 15: Asset Quality Summary
Asset Quality Summary Credit quality continued its favorable trend quarter-over-quarter Portfolio migrating to higher quality asset mix Allowance coverage remains strong relative to net charge-offs and non-performing loans Loan balances grew quarter-over-quarter driven by strong auto originations Al
Slide 16: North American Automotive Finance
North American segment reported pre-tax income of $568 million Gain on sale revenue declined $43 million compared to 2Q Lower loss provision driven by improvement in credit trends and asset mix 3Q originations higher due to increased market share and diversification strategy Continued shift from sub
Slide 17: International Automotive Finance
International operations earned $74 million of pre- tax income compared to $105 million in 2Q Loan loss provision expense favorable due to improved asset quality Noninterest expense increased due to certain non-recurring items in 2Q Another strong quarter of originations in China, Brazil and the U.K
Slide 18: Global Auto Finance – Consumer Credit Trends
Global Auto Finance – Consumer Credit Trends Retail auto losses and delinquencies have returned to historical levels Delinquency trends continued to show improvement in 3Q, despite typical seasonal trends Sustained benefit from operational improvements in collection activities Nuvell portfolio exper
Slide 19: Global Auto Finance - Allowance Coverage Ratios
Global Auto Finance - Allowance Coverage Ratios North American consumer coverage ratio decreased primarily driven by a change in the asset mix as a result of continued runoff of our liquidating portfolios and improved credit quality trends Coverage ratio remains strong relative to charge-off levels
Slide 20: Insurance
Insurance 3Q pre-tax income of $114 million increased slightly over 2Q driven primarily by lower expenses Written premiums increased at Dealer Products and Services driven by: Increase in auto originations leading to more vehicle service contracts Increase in dealer floorplan International written p
Slide 21: Mortgage Operations
Mortgage Operations Mortgage operations reported pre-tax income from continuing operations of $154 million Originations and servicing business continued to post strong results Third quarter production was $20.5 billion, up significantly from 2Q and driven primarily by refinancings Margins remain fav
Slide 22: Mortgage Repurchase Reserves
Mortgage Repurchase Reserves Ally increased the reserve for mortgage repurchases to $1.1 billion this quarter resulting in a $344 million pre-tax expense Repurchase reserves for losses are based on observed losses, modeled projections of vintage delinquencies, repurchase rates and loss severity Clai
Slide 23: Mortgage Operations - Allowance Coverage Ratios
Mortgage Operations - Allowance Coverage Ratios Allowance balance and HFI portfolio down from prior year driven by strategic actions taken in 2009 Consumer coverage declined slightly driven by the continued runoff of legacy assets Commercial coverage down relative to prior periods as certain distres
Slide 24: Liquidity
Liquidity Ally utilizes a two-pronged funding strategy designed to support stable liquidity and diversify funding sources 1) Cost efficient funding at Ally Bank Continued to fund over 65% of new auto originations at the bank level Net bank deposits grew by $2.6 billion with all time high CD retentio
Slide 25: Deposits
Deposits Average CD Maturity and Rate (months) 12.0 11.3 12.8 24.2 25.5 26.8 2.96% 2.59% 2.34% 2.00% 1.82% 1.76% 0.0 5.0 10.0 15.0 20.0 25.0 30.0 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 0.00% 1.00% 2.00% 3.00% 4.00% Avg. Maturity of Newly Originated CDs Avg. Retail Deposit Rate Retail CD Balance Retenti
Slide 26: Capital Ratios
Capital Ratios Note: See slide 43 for further details Regulatory capital improved during the quarter driven by positive net income Risk-weighted assets were up slightly as the decline from the sale of European mortgage assets was offset by strong auto and mortgage originations ($ billions) 9/30/2010
Slide 27: Summary
Summary All four operating segments were profitable, along with Ally Bank and ResCap legal entities Continue to emerge as preeminent auto finance company Meaningful diminution of legacy mortgage risk Liquidity significantly strengthened Positioned to explore further capital alternatives Third Quarte
Slide 28: Supplemental Charts
Supplemental Charts
Slide 29: Condensed Consolidated Income Statement
Condensed Consolidated Income Statement Supplemental ($ millions) 3Q 10 2Q 10 3Q 09 2Q 10 3Q 09 Total financing revenue and other interest income 2,782 $ 2,902 $ 3,217 $ (120) $ (435) $ Interest expense 1,733 1,664 1,748 69 (15) Depreciation expense on operating lease assets 454 526 894 (72) (440) N
Slide 30: North American Auto - Condensed Income Statement
North American Auto - Condensed Income Statement Supplemental ($ millions) 3Q 10 2Q 10 3Q 09 2Q 10 3Q 09 Total financing revenue and other interest income 1,810 $ 1,943 $ 2,182 $ (133) $ (372) $ Interest expense 563 568 556 (5) 7 Depreciation expense on operating lease assets (1) 430 486 842 (56) (4
Slide 31: International Auto - Condensed Income Statement
International Auto - Condensed Income Statement Supplemental ($ millions) 3Q 10 2Q 10 3Q 09 2Q 10 3Q 09 Total financing revenue and other interest income 434 $ 422 $ 546 $ 12 $ (112) $ Interest expense 234 209 298 25 (64) Depreciation expense on operating lease assets 24 39 51 (15) (27) Net financin
Slide 32: Mortgage Operations - Condensed Income Statement
Mortgage Operations - Condensed Income Statement Supplemental ($ millions) 3Q 10 2Q 10 3Q 09 2Q 10 3Q 09 Total financing revenue and other interest income 455 $ 456 $ 463 $ (1) $ (8) $ Interest expense 308 302 311 6 (3) Net financing revenue 147 154 152 (7) (5) Servicing fees (1) 343 328 323 15 20 S
Slide 33: Corporate and Other - Condensed Income Statement
Corporate and Other - Condensed Income Statement Supplemental ($ millions) 3Q 10 2Q 10 3Q 09 2Q 10 3Q 09 Net financing loss (1)(2) (568) $ (529) $ (605) $ (39) $ 37 $ (Loss) gain on extinguishment of debt (2) (3) 10 1 (12) Other income, net of losses (3) 36 39 257 (3) (221) Total other revenue (expe
Slide 34: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet Supplemental ($ millions) 9/30/10 6/30/10 9/30/09 6/30/10 9/30/09 Cash and cash equivalents 12,589 $ 14,348 $ 14,225 $ (1,759) $ (1,636) $ Trading securities 211 209 908 2 (697) Investment securities 11,925 12,710 13,468 (785) (1,543) Loans held-for-sale 13,265 1
Slide 35: Corporate and Other
Corporate and Other OID amortization from bond exchanges continues to be a key driver of results Approximately $300 million of OID amortization expense remains for 2010, with expense moderating significantly after 2011 Sale of Resort Finance business resulted in a recovery recognized through provisi
Slide 36: Discontinued Operations
Discontinued Operations Ally continues to make significant progress in streamlining operations Closed sale of European mortgage operations, effectively exiting Ally from European mortgage market Sold Argentina auto finance business and signed agreement to sell Ecuador auto finance Supplemental Impac
Slide 37: Supplemental Automotive Information
Supplemental Automotive Information $303 $878 $412 $756 $843 Supplemental Sales Proceeds as % of ALG (1) (U.S. Lease Scheduled Terminations) (1) Estimated remarketing proceeds at time of lease origination 70% 80% 90% 100% 110% 120% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2008 2009 2010
Slide 38: Mortgage Operations Asset Roll Forward
Mortgage Operations Asset Roll Forward Mortgage balance sheet reduced by $5 billion driven by sale of European operations, partially offset by growth in Ally Bank conforming production Supplemental 6/30/2010 Quarterly Activity 9/30/2010 ResCap, LLC Assets Cash and cash equivalents 0.6 $ (0.0) $ 0.6
Slide 39: Ally Bank HFI Portfolio
Ally Bank HFI Portfolio In conjunction with strategic actions taken in 4Q09, higher risk loans at Ally Bank were reclassified as held for sale, marked to a market based level, purchased by Ally Financial and contributed to ResCap As a result, the credit quality of Ally Bank’s remaining HFI portfolio
Slide 40: ResCap, LLC - Key Financial Information
ResCap, LLC - Key Financial Information ResCap met its covenants with tangible net worth of $859 million at the end of the third quarter (1) For the purpose of ResCap’s tangible net worth covenants, consolidated tangible net worth is defined as the company’s consolidated equity, excluding intangible
Slide 41: Liquidity and Unsecured Debt Maturity Profile
Liquidity and Unsecured Debt Maturity Profile Supplemental Available Liquidity 9/30/2010 6/30/2010 ($ billions) Parent (1) Ally Bank Parent (1)(2) Ally Bank Cash and Cash Equivalents 7.2 $ 4.1 $ 10.3 $ 2.6 $ Unencumbered Securities (3) 0.5 3.3 1.1 3.8 Current Secured Committed Unused Capacity (4) 10
Slide 42: Ownership Structure
Ownership Structure Supplemental Common Ownership as of 9/30/2010 GM 6.7% GM Trust 9.9% 3rd Party Investors 12.2% Cerberus 14.9% US Treasury 56.3% ($ millions) Series Owner Liquidation Preference Book Value Trust Preferred Securities (1) U.S. Treasury $2,667 $2,540 Series F-2 Mandatory Convertible P
Slide 43: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures Supplemental Slide 14 – High Quality Balance Sheet Included in Loans Held for Sale: Retail Auto ($1,049), Ally Bank Mortgage HFS, ResCap Mortgage HFS and Securitized Mortgage Assets and Other ($2,436) Included in Finance Receivables and Loans, net (Consumer): Ret