Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q4 2019 Earnings Presentation
44 slides from Ally Financial's earnings presentation, Jan 22, 2020
Slide 1: Ally Financial Inc. 4Q 2019 Earnings Review
Ally Financial Inc. 4Q 2019 Earnings Review January 22, 2020 4Q 2019 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 – Annual
GAAP and Core Results – Annual ($ millions except per share data) 2019 2018 2017 2016 2015 2014 GAAP net income (loss) attributable to common shareholders ("NIAC") $ 1,715 $ 1,263 $ 929 $ 1,037 $ (1,282) $ 882 Core net income attributable to common shareholders (1)(2) $ 1,472 $ 1,427 $ 1,091 $ 1,043
Slide 4: GAAP and Core Results – Quarterly
GAAP and Core Results – Quarterly ($ millions except per share data) 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 GAAP net income attributable to common shareholders ("NIAC") $ 378 $ 381 $ 582 $ 374 $ 290 (1)(2) Core net income attributable to common shareholders $ 364 $ 396 $ 387 $ 325 $ 382 GAAP earnings per com
Slide 5: 2019 Full-Year Highlights
2019 Full-Year Highlights Continued Delivering Against Our Long-Term Objectives > Adjusted EPS(1) of $3.72 – up 12% YoY | Core ROTCE(1) of 12.0% ▪ Adjusted total net revenue(1) of $6.3 billion – up 5% YoY > Auto: Solid origination volumes and enhanced risk-adjusted returns ▪ Consumer auto originatio
Slide 6: 2019 Full-Year Financial Performance
2019 Full-Year Financial Performance Met or Exceeded ALL Investor Guidance 2019 Outlook 2019 Actuals Adjusted EPS (1) Growth Up 7 – 10% $3.72 | ↑ 12% P Core ROTCE (1) 12 – 13% + 12.0% P Adjusted Total Net Revenue (1) Up 4 – 6% $6.33B | ↑ 5% P Adjusted Efficiency Ratio (1) Flat to Down 1% 47.4% | ↓ 2
Slide 7: Core Metric Trends
Core Metric Trends Adjusted Earnings Per Share(1) Adjusted Total Net Revenue(2) ($ millio ns) $0.97 $1.01 $1,620 $1,622 $0.95 $0.91 $0.92 $1,556 $1,557 $1,535 $0.83 $0.80 $1,521 $424 $1,492 $1,472 $1,480 $1,463 $1,471 $458 $393 $393 $0.70 $0.68 $392 $396 $0.65 $1,383 $1,391 $388 $381 $379 $356 $394
Slide 8: Adjusted EPS and Core ROTCE
Adjusted EPS(1) and Core ROTCE(1) Sustained Financial Improvement Adjusted Earnings per Share(1) Core ROTCE(1) 17% CAGR + 415 bps $3.72 12.3% 12.0% $3.34 10.0% 9.8% 9.4% $2.39 $2.16 7.9% $2.00 $1.68 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 (1) Represents a non-GAAP financial measu
Slide 9: Adjusted Total Net Revenue
Adjusted Total Net Revenue(1) Balance Sheet Powering Ongoing Revenue Expansion Adjusted Total Net Revenue(1) ($ millions) ‘14 → ‘19 $6,334 ↑ $1.35B $5,836 $6,011 $5,498 $5,262 $4,985 $4,662 ↑ $1.12B $4,292 $4,476 $3,764 $3,964 $3,547 $1,438 $1,498 $1,534 $1,544 $1,535 $1,672 ↑ $233M 2014 2015 2016 2
Slide 10: Earning Asset Trends
Earning Asset Trends Steady Growth and Ongoing Asset Optimization ($ billions; end of period balances) ‘14 → ‘19 $170.8B $172.7B ↑ $29.5B $156.1B $160.7B $4.7 $5.8 $151.4B $4.0 $16.7 $17.4 $143.2B $2.7 $3.2 $13.7 $9.8 $11.1 $1.9 $7.5 $32.3 $25.8 $29.2 $35.9 $23.6 $22.3 $34.0 $34.9 $38.9 $37.1 $38.1
Slide 11: Noninterest Expense
Noninterest Expense Focused on Efficiency Gains While Prudently Investing for the Future ($ millions) $3,429 $3,264 $3,110 $2,948 $2,939 $2,761 $1,013 $955 $950 $988 $940 $879 50.8% $2,309 $2,416 $2,160 $1,960 $1,882 $1,999 47.6% 47.4% 45.3% 45.4% 45.8% 2014 2015 2016 2017 2018 2019 (1) (2) (3) Noni
Slide 12: Fourth Quarter and Full-Year 2019 Financial Results
Fourth Quarter and Full-Year 2019 Financial Results ($ millions; except per share data) 4Q 19 3Q 19 4Q 18 2019 2018 (1) Net financing revenue (excluding Core OID) $ 1,164 $ 1,195 $ 1,163 $ 4,662 $ 4,476 Core OID (8) (7) (23) (29) (86) Net financing revenue (as reported) $ 1,156 $ 1,188 $ 1,140 $ 4,6
Slide 13: Balance Sheet and Net Interest Margin
Balance Sheet and Net Interest Margin ($ millions) 4Q 19 3Q 19 4Q 18 2019 2018 Average Average Average Average Average Balance Yield Balance Yield Balance Yield Balance Yield Balance Yield Retail Auto Loan $ 72,626 6.68% $ 73,162 6.66% $ 69,982 6.39% $ 72,268 6.60% $ 69,804 6.14% memo: Retail Auto L
Slide 14: Deposits
Deposits • Total deposits of $120.8 billion, up $14.6 billion or 14% Retail Deposit Balance Growth YoY Deposit Levels (EOP) and Customer Retention Rate – Strong customer retention rate at 96% ($ billions) $116.3 $119.2 $120.8 $113.3 $106.2 $17.9 $17.0 $17.9 $17.7 • Ending retail deposits at $103.7 b
Slide 15: Capital
Capital • Preliminary Basel III transition CET1 ratio of 9.5% Capital Ratios and Risk-Weighted Assets – YoY risk-weighted asset decline driven by lower commercial auto balances 12.3% 12.5% 12.7% 12.8% 12.8% 10.8% 11.0% 11.2% 11.2% 11.2% • Repurchased 9.6M shares in 4Q 19 – nearly 23% 9.1% 9.3% 9.5%
Slide 16: CECL Perspectives
CECL Perspectives • Expect day 1 implementation of Current Expected Credit Losses (“CECL”) accounting Day 1 standard on January 1, 2020 to result in approximately 106% increase to 4Q reserves Reserve – Expect 1Q 20 CET1 impact of 17-19bps (in accordance with phase-in), based on tax-effected reserves
Slide 17: Asset Quality
Asset Quality Consolidated Net Charge-Offs Provision Expense ($ millions) Provision Expense 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 0.91% 0.84% 0.85% 0.83% Retail Auto $ 229 $ 261 $ 257 $ 180 $ 264 $ 256 0.75% 0.73% Commercial Auto - 1 5 - 1 (1) 0.57% 0.56% Mortgage Finance 2 (3) 2 - - 3 Corporate Finan
Slide 18: Auto Finance – Results
Auto Finance – Results • Pre-tax income of $401 million, up $66 million YoY Increase/(Decrease) vs. and down $28 million QoQ Key Financials ($ millions) 4Q 19 3Q 19 4Q 18 Net financing revenue $ 1,061 $ (17) $ 82 – Net financing revenue increased YoY due to higher retail Total other revenue 61 2 1 T
Slide 19: Auto Finance – Key Metrics
Auto Finance – Key Metrics Consumer Originations Origination Mix ($ billions; % of $ originations) (% of $ originations) 688 692 688 685 688 691 $9.2 $9.7 $9.3 53% 52% 56% 54% 50% 49% $8.1 $8.2 $8.1 49% 50% 46% 47% 47% 44% 12% 10% 14% 14% 10% 11% 25% 25% 28% 29% 35% 38% 34% 37% 27% 26% 35% 36% 11% 1
Slide 20: Insurance
Insurance • Pre-tax income of $114 million, up $127 million YoY Increase/(Decrease) vs. and up $58 million QoQ Key Financials ($ millions) 4Q 19 3Q 19 4Q 18 Premiums, service revenue earned and other $ 288 $ 5 $ 17 • Core pre-tax income(1) of $86 million, up $7 million Losses and loss adjustment exp
Slide 21: Corporate Finance
Corporate Finance • Pre-tax income of $50 million, up $29 million YoY Increase/(Decrease) vs. and up $6 million QoQ Key Financials ($ millions) 4Q 19 3Q 19 4Q 18 Net financing revenue $ 64 $ 4 $ 13 • Core pre-tax income(1) of $50 million, up $25 million Adjusted total other revenue (1) 15 4 9 YoY an
Slide 22: Mortgage Finance
Mortgage Finance • Pre-tax income of $2 million, down $13 million YoY Increase/(Decrease) vs. and $9 million QoQ Key Financials ($ millions) 4Q 19 3Q 19 4Q 18 Net financing revenue $ 36 $ (3) $ (12) – Total net revenue down YoY, reflecting faster prepayments, Total other revenue 6 (4) 4 higher premi
Slide 23: 2020 Full-Year Outlook
2020 Full-Year Outlook 2019 FY Results 2020 Outlook Adjusted EPS(1) $3.72 ↑ 10 - 15% YoY Growth Reflects steady coverage rate Core assumption 12.0% 12 - 13% under CECL ROTCE(1) methodology Adjusted Total $6.33B ↑ 6 - 9% YoY Net Revenue(1) Adjusted 47.4% ↓ 50 - 150bps YoY Efficiency Ratio(1) Retail A
Slide 24: Conclusion
Conclusion Relentless Customer Focus and ‘Do It Right’ Culture Ongoing optimization of market leading Auto Lending and Insurance business lines Consumer & Commercial Sustained growth in customers and optimization Savings & Insurance of deposit funding profile Checking Expanding consumer product offe
Slide 25: Supplemental
Supplemental 25 4Q 2019 Preliminary Results
Slide 26: Results by Segment
Supplemental Results by Segment Pre-Tax Income ($ millions) 2019 2018 4Q 19 3Q 19 4Q 18 Automotive Finance $ 1,618 $ 1,368 $ 401 $ 429 $ 335 Insurance 315 80 114 56 (13) Dealer Financial Services $ 1,933 $ 1,448 $ 515 $ 485 $ 322 Corporate Finance 153 144 50 44 21 Mortgage Finance 40 45 2 11 15 Corp
Slide 27: Funding and Liquidity
Supplemental Funding and Liquidity • Ally Bank funded assets at 93% up 4 pts YoY Growth in Bank Funded Assets • Deposits at 75% of total funding (excluding Core ($ billions) $178.9 $180.6 OID balance)(a) up 9 pts YoY $158.6 $163.7 $167.1 • Wholesale funding in 4Q: 93% – $1.0 billion of new retail se
Slide 28: Corporate and Other
Supplemental Corporate and Other • Corporate and Other includes the impact of Increase/(Decrease) vs. centralized asset and liability management, Key Financials ($ millions) 4Q 19 3Q 19 4Q 18 corporate overhead allocation activities, the Net financing (loss) $ (18) $ (15) $ (65) Total other revenue
Slide 29: Interest Rate Sensitivity
Supplemental Interest Rate Sensitivity Net Financing Revenue Impacts (1): Baseline vs. Forward Curve 4Q 19 3Q 19 ($ millions) Gradual (2) Instantaneous Gradual (2) Instantaneous -100 bp $ 17 $ 67 $ (20) $ (29) +100 bp $ (1) $ 7 $ 17 $ 22 Stable rate environment n/m $ 13 n/m $ (91) (1) Net financing
Slide 30: Deferred Tax Asset and Effective Tax Rate
Supplemental Deferred Tax Asset and Effective Tax Rate Deferred Tax (Liability) / Asset 4Q 19 3Q 19(1) ($ millions) Gross DTA/(DTL) Valuation Net DTA/(DTL) Net DTA/(DTL) Balance Allowance Balance Balance Net Operating Loss (Federal) $ 7 $ - $ 7 $ 8 Tax Credit Carryforwards 1,784 (737) 1,047 918 Stat
Slide 31: 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 32: GAAP to Core Results: Adjusted EPS - Annual
Supplemental GAAP to Core Results: Adjusted EPS - Annual Adjusted Earnings per Share ("Adjusted EPS") FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ millions) GAAP net income attributable to common shareholders $ 1,715 $ 1,263 $ 929 $ 1,037 $ (1,282) $ 882 Discontinued operations, net
Slide 33: GAAP to Core Results: Adjusted EPS - Quarterly
Supplemental GAAP to Core Results: Adjusted EPS - Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 Numerator ($ millions) GAAP net income attributable to common shareholders $ 378 $ 381 $ 582 $ 374 $
Slide 34: GAAP to Core Results: Adjusted TBVPS - Annual
Supplemental GAAP to Core Results: Adjusted TBVPS - Annual Adjusted Tangible Book Value per Share ("Adjusted TBVPS") FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ billions) GAAP shareholder's equity $ 14.4 $ 13.3 $ 13.5 $ 13.3 $ 13.4 $ 15.4 Preferred equity - - - - (0.7) (1.3) GAAP co
Slide 35: 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 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 Numerator ($ billions) GAAP common shareholder's equity $ 14.4 $ 14.5 $ 14.3 $ 13.7 $
Slide 36: GAAP to Core Results: Core ROTCE - Annual
Supplemental GAAP to Core Results: Core ROTCE - Annual Core Return on Tangible Common Equity ("Core ROTCE") FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ millions) GAAP net income attributable to common shareholders $ 1,715 $ 1,263 $ 929 $ 1,037 $ (1,282) $ 882 Discontinued operations
Slide 37: 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 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 Numerator ($ millions) GAAP net income attributable to common shareholders $ 378 $ 381 $ 582 $ 374 $ 290 Discontinued operations, net of tax 3
Slide 38: GAAP to Core Results: Adjusted Efficiency Ratio - Annual
Supplemental GAAP to Core Results: Adjusted Efficiency Ratio - Annual Adjusted Efficiency Ratio FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Numerator ($ millions) GAAP noninterest expense $ 3,429 $ 3,264 $ 3,110 $ 2,939 $ 2,761 $ 2,948 Rep and warrant expense (0) 3 0 6 13 10 Insurance expense (1
Slide 39: GAAP to Core Results: Adjusted Efficiency Ratio - Quarterly
Supplemental GAAP to Core Results: Adjusted Efficiency Ratio - Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 Numerator ($ millions) GAAP noninterest expense $ 880 $ 838 $ 881 $ 830 $ 804 Rep and warrant expense - (0) (0) - 1 Insurance expense (238) (247) (301) (22
Slide 40: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures ($ millions) FY 2019 FY 2018 FY 2017 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
Slide 41: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures ($ millions) FY 2016 FY 2015 FY 2014 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
Slide 42: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures ($ millions) 4Q 19 3Q 19 4Q 18 Change in the Change in the Change in the fair value of fair value of fair value of GAAP Core OID Non-GAAP (1) GAAP Core OID Non-GAAP (1) GAAP Core OID Non-GAAP (1) equity equity equity securities securities s
Slide 43: Notes on Non-GAAP and Other Financial Measures
Supplemental Notes on Non-GAAP and Other Financial Measures Net Financing Revenue (ex. Core OID) ($ millions) FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 GAAP Net Financing Revenue $ 4,633 $ 4,390 $ 4,221 $ 3,907 $ 3,719 $ 3,375 Core OID 29 86 71 57 45 172 Net Financing Revenue (ex. Core OID) [a
Slide 44: 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) 4Q 19 3Q 19 2Q 19 1Q 19 4Q 18 3Q 18 2Q 18 1Q 18 4Q 17 3Q 17 2Q 17 1Q 17 4Q 16 Core original issue discount (Core OID) amortization expense (1) $ 8 $ 7 $ 7 $ 7 $ 23 $