ALLY - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Ally Financial First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference call may be recorded. I would now like to hand the call over to, Mr. of Director Executive Eller, Investor Relations. Daniel

begin. may You

Daniel Eller

us Thank review to joining XXXX you, We appreciate Amanda. this Ally morning results. everyone Financial's quarter first

by and on our slide two the throughout the supplemental not operating a the performance presentation, of You we'll investors end operating your and on of to measures. management, and Web capital have GAAP measures. the included attention direct will substitute we measures, call CFO, to CEO, language. for reconciliations. On to this our and supplemental at useful and factors. On risk some our The call find section slides measures governed U.S. the of be full are statements in to and Investor The financial core contents ally.com. are believe can Jen site I of are by please definitions and assessing non-GAAP and Today, key these core include company's other GAAP our they Jeff three, in These and Relations today's our the keep LaClair we've results. we forward-looking Brown; our the presentation the or call mind used reference slide review

set that, time after I'll have to aside for Brown. with remarks We turn the over Q&A. And prepared Jeff the call

Jeff Brown

everyone. across our you have financial our joining process. appreciate call. the morning, close in the efficiency We terrific done a organization Daniel. entire job and company, Good finance Thank focusing you, Jen on including opportunities

up $X.XX Revenues company, for stellar The quarter had track XXXX us EPS and adapt profile me while XX number where in We points and our market that's customers. period. of a expertise about across environments. the insurance cover with we’ve increased house. the of finance, strategic Performance I over constant XXX On let consistent. the $X.X we’ve We a spectrum. the our remain results, increase slide focus of ROTCE full quarter announced the offering our deposit years quarter but risk year-over-year. franchises. the variety a ahead us leader partner our past on year entire exceeded to the maintained with quarter, billion the seeing of to through week the US, We adjusted finance shift suite year-over-year, from our to So and Core financial was in now first XX% across X% solid dealers credit on and the a XX.X% We unrelenting XX,XXX than prior operating cadence inside our on outlook. was a you're this basis a auto auto in very highlights. big execution across to continuously leverage win X, historically and we've long-term how built believe position keeps compared business objectives focus more our a products

players. Over of billion while We during attractive broader on This of dealers applications quarter. and during us. dealership originated approach the relationships few the loans expanding we the on digitization leases emerging the years, in across record for a decision at auto-decisioning, and levels level, past at X.X million universe highest X.X resulted focused quarter, increased the

of X.X% basis declined Newly XXX the in year-over-year. year, charge-offs X.X% XX the basis compared originated yields exceeded net to points auto points period, while in prior increase an

advantage market to diversified strategy Our allows us of take opportunities.

level Finance in near its the universe, XXXX. highest used historical at Within was lending or Auto

adapted of is and shifting in we of needs market a the customers. prime how in used expertise a originations XXXX. have and the fifth the for above position XX% segment in XQ our drove XX% consecutive response reaching the example business Our quarter, to This

you remain in sheet consumer. just monitor quarter and overall metrics along remains has health in trends. XXXX, and as in Wage continued Employment performance consumer of the macro continue credit, at and of and loss to at for We portfolio balance we All term. yields accelerate factors increasing the closer robust. portfolio support conditions and well-positioned, Looking debt-to-income heard near outlook see growth Auto the with our both declining these stable to actively around the year-over-year, a another the and consistent across signs our trends, improved US payment-to-income looking Consumer rates. portfolio positive

well-positioned fully have is secured payment sheet that over of balance priority assets and the Our comprised in demonstrated high cycles. predominantly waterfall many

increase with an of to in XXX nearly over quarter year-over-year. billion we Turning billion ended XX balances, deposits, the

Momentum retail elevated high meet of continued to campaign, and a full-year growth driving and This There. Performance reflects recent direct our strong these our growth. thirds experience, the Appetite growth two marketing Better to total was approach less of quarter, have to of strength growth criteria highest including consistent customers the levels, industry-leading proposition. utility, first grow the deposits consumers our driven products service million the us value Out and product and share that quarter, attractive many banking over market represent grow, mobile nice Ally's to for model. forward deposit customer, throughout and position equal ever and our of all in greater and than from and XX% traditional proposition deposit deposit X.XX nationwide still Digital a rates. with exceptionally highlighted banking quarter the industry-leading source quarter value form been balance of products liquid depositors. demonstrates we main digital of differentiated offerings, our levels, XXXX and Nearly combination compelling We in continues service the given with levels by came full-year retail experienced banks. transparency customer prioritize new digital our with has balance convenience. customer XXX,XXX products compelling growth value XXXX our Record of of that a is increased this over in today, of and and the billion, inflows XX% to of bundled brand X.X world-class retail path XX% retail as growth of added

we Looking momentum a businesses, invest of offering acquired quarterly Ally growth in XXXX. quarter across continued To enhance business expansion. since seen highest today solid home the are space. able finance XX the Better Invest of application and a an to Home a late high digital existing corporate reached at asset another an the Ally the had value, originations we will were and industry-leading the we've announcing level account this direct-to-consumer minutes. aligned further be platform. while XXXX. with our for levels Ally strongest million in launched XXX in fits in offerings, other for since rate better.com, in and Customers experience, this experience customers, complete three minutes experience we're lock origination relationship partnership and customer driving scalable simple, strategy our under the within cost-effective in our under

structure and We of superior or who base experience. XX% year. also deliver increase partnership an will year XQ customer We the believe XXX,XXX bank a our allow with existing ended this and us, with us prior XX% quarter two have versus expense products reduce over customers meaningfully more and cost to Ally

across bank longer announced approach the leads year. Board-approved a offer increase areas. perspective, and over to been that experience retention customer of $X.XX repurchase share will the a to existing From program XX% term. a June repurchase we close out this capital the in billion, plan deposit has our of we're accretive increases pleased with Ally gaining in We're customers to earnings and products. This beginning the from momentum strategy traditional a digital differentiated Our these

we a shareholder were As the CCAR we to Category than remains X submission subject previously not to the of attractive earlier levels bank, for year. calendar us. shares announce this have capital use had efficient as Repurchasing flexibility an we at

due the XQ, and to is of over review EPS bottom of adjusted to last increased we this compared made base the total these back progress year Trends And revenue and of XX% five in funding was per in higher. In to the share our the year-over-year. two up growing million to in execution. customer slide looking Ally demonstrates expanded prior by the trends and by XQ meaningful source period, stable, left our quarter. to Deposits key are upper year net a billion metrics where number demonstrate consistent turn billion XXXX. XX% of more XX% first entry to $X.XXX our left, slide efficient to while Bank. to This days quarter serves first represent seasonality, the were XX% each metric fewer Let's a compared to trajectory impacted as of $XXX adjusted now Year-over-year, point quarter, $XX compared on on meaningfully this the that $X.XX continued few metrics. comparable funding

the important shareholders. increased value on per book the building inherent value year-over-year right for we're to an linked On of $XX.XX share, basis tangible bottom a and indicator

moving narrative the out financial hear We We through to are our mindful that, build well-positioned the remains and there turn uncertainties Jen to of execute And to take both upon and to it momentum. operationally detailed forward. actively around with and while increasing I'll management for risks opportunities focused the our results. team looking you economic financially over

Jennifer LaClair

good and morning JB, everyone. you, Thank

of slide Let's our results. for to review detailed six turn financial

in yield increased us migrate year this our and left robust financing last expectations XXXX JB fund funding every growth was the asset As while we're At new $XX over business million volume with excluding million, in and revenue lines pricing this OID us and our where growth categories, earnings outlook moments item. expansion our across efficient quarter book continues mentioned reducing up Net line quarter in $XX few billion cost auto call. provided asset results allows also alternative $X.XXX position sources. burning down the on by which deposit income year in in across optimization ago, a year driven against to portfolio higher linked net line financial well trending to toward was interest our point capital

versus year. Q period revenue million expect asset quarter provision over year of prior increased to lower activity by $XXX to of NII to levels, QX the growth credits. year reserves increased million and our period, hurricane of the finance over year $XXX related was due reserve $XX throughout $XX of higher prior portfolio related primarily rest the compared to XXXX. million modestly corporate million other The expense in Adjusted leases in We and quarter increase

were over offs year the net lower comparison. within our charge linked Importantly year and quarter in auto

basis For increased by in QX. occurs $XX Non-interest On leverage largely where year, prior operating million linked a due year to the we QX prior scale. some now disciplined of us activities build been along higher to continues Expense collection a key businesses, familiar consumer our brand. performance and This We'll and a profile. capabilities credit were financial continue including and solid digital cover particularly a consistent businesses detail trends that expenses. underwriting by investments outpaced and on we revenue growth strategies area versus to year seasonality gains should X% million in growth is have the all drove with and year a focus increases moments. executing capabilities that in to as items volume we've were versus for driven in few $XX compared X% compensation here affirms and expense that time for in tech quarter products across our be disciplined and revenue based more you to that and our over

absolute We through expect revenue committed to operating on an XXXX throughout growth continue to driving time remain but over and expense efficiencies. leverage growth basis,

$X.XX a XXX and quarter, decline run XX.X%, efficiency per adjusted and Looking rate. QX metrics were basis expected EPS below tax at XXXX, in to and XX% XX% share, annual GAAP slightly rate of from Core XX.X% points and $X.XX adjusted of a XX.X%, of ROTCE our key ratio the of for

Turning slide review I'll and interest net balance sheet to seven, margin.

X.XX%, part of sides First past of level in more volatility benchmark to X has industry relatively to move. sensitive of continues rate We seasonal higher wide billion $X.X position asset income auto down the re-pricing asset prior perceptions high five scheduled to $XXX Fed's a and basis of be is optimization with balance relative liability curve may a manage persistently ago. We've earning relatively Net an next and has at A XXXX and neutral volatility issuance and continually earning years perspective ongoing was growth with markets rate of shape unchanged significant we have these reduced risk while the range including sheet. X% XX% for position well our think a several strategy. the experienced from over both an on funding interest excluding billion at we Year billion cost been now points the NIM over over interest with thoughtfully average capital of grew which and stable unsecured risk managing $X sheet. the while was the coupon X% OID lease appropriate our of curve interest debt and rates moving have flattened. some balance quarters, mature diversification assess modest forward of an time billion quarter-over-quarter reflecting funding neutral We assets volatility data the $X asset versus NIM of related accept dynamics forward year lower from margin average year. declining inside amount X.X% efficient prices elevated another across levels. to of Through particularly wholesale of to the now, balances

XX compared over book. normalized up basis XX prior quarter above XX points quarter the increased around points trend drive XX in loans our of as year. In car basis Asset and yields consistent year. over the quarter portfolio the quarter portfolio over yield portfolio yield and of to linked was Retail year by expectations two basis and with year. used auto, commercial XX years ongoing yield Lease to declined over X.XX%. points over and in through compared basis yields the gained auto higher prices year next turnover points quarter of basis the prior moved the linked X% quarter portfolio X% the points originating year basis The steadily increased will to points sustained X X.XX%

floating As a in of our indices, QX. floor which rate leveled XX% of assets priced plan off reminder

of ongoing over quarter, the the base $X.X billion billion $X.X of liabilities this and lower to down to the cost the billion funding average funding. growth of Moving high in migration earning our accelerated of billion asset deposits $X.X roll several past deposit growth secured financed years $X.X unsecured out

our to fueled by upper strong remains details. slide record an see our look satisfaction at eight, and retention growth. the at Turning key the we'll customer billion deposit Customer growth of some of billion can of meaningful loyalty. XX% indicator closer of you ending portfolio $XXX In overall high at deposit right a retail and over $X.X brand

points at in since linked now and rates and XX% deposit expect steadily XX% to the beta are retail outlook. deposit time. reflecting the December beginning tightening Fed with increased We portfolio quarter over of left, XX to funded to the In move basis XX% XX% bottom resulting cycle a in the aligned of expectations hike our

the customers. right, space past well deposit total pricing remain XX X.XX as over we months the the Our XX tightening the current to the for of digital thoughtful disciplined to will largest are around intensified the growth. bottom activity million months XXXX In perhaps fully this deposit digital reaching and forecast it we positioned shows re-pricing XXX,XXX Fed gatherer and this we customers but to space and added and and competition believe has grow actions across continues no drive in remainder last

of of XX% accounted balance marketing growth millennials deposit augmentation among robust service products, while combination strong impactful our of item of came account XX% strong loyalty, a openings. and continued great among customer rates. growth new and high We've differentiated the through for representing momentum disruptive, including results JB customers earlier customers mentioned from existing and achieved XX% New

of to to in share this to decline inception this CETX program the XX% attractive X.X% current repurchase of roll begin earnings of repurchased a and compared our nine. of since will slide approved board representing of QX on capital July Earlier We XX% increase of buyback shares quarter, to over This the prior a disallowed the a down book outstanding month, in value. X.X% billion year market this the program XX% at represents a our that $X.XX turn around our of plan. repurchase relative year. levels executed DTA. due Let's increase and compared growth the current to cap

the to aligned well impact processes. May And opportunity on we first second of XX capital capital, and Additionally, quarter the approved with the positioned incorporate quarter. the regarding recently our implementation ongoing phase-in are to into payable management CECL dividend $X.XX, Board the

trajectory We and businesses. focus continue in on to capital growth our of distributions our ongoing expect and investments

trends the was on consistent net million this to year, basis quarter, reflecting compared of by down $XXX points details our portfolio XX. XX year-over-year, came quality slide prior higher Asset XX risk upper performance up basis points at in provision charge-offs in on driven focus the Consolidated the In and of million right, consolidated loan a improvement reserves fifth Corporate to our management. charge-offs QX $XX expense bottom releases Finance XX X.X%, retail credits. retail increased decline. In year-over-year, related hurricane-related in the reduced the by of at consecutive and left, lower coverage Auto few balances slightly macroeconomic points basis year-over-year and portfolio ratio were quarter net have uptick that moderated, reflecting the in auto

point bottom same trends the delinquency XX-plus at basis the in period. over X Looking increased year-over-year XX-plus declined X right, points by and basis

levels see year-over-year use the and XXXX, throughout We slightly expect higher delinquency remainder mix of the to higher of portfolio. our seasoning reflecting

Taken charge-offs for on expectation our our to together, range low be for end the with X.X% trends net align to X.X% these full-year. the of

of of the Auto our in pleased majority We On consistent balances recent slide down year. a quarter today. our $X and prior million that up comprise in versus million prior of are the portfolio, $XXX reflection stable performance versus vintages million Finance credit pre-tax with $XX was income XX,

revenue credit network, dealer leads level to access approach flow. originated underwriting offer, earning financial strong relationships and and products continued and yielding across the distribution is lower results. this AF fueled higher and and to disciplined older This diversified is the by yielding You've net expanded to heard our Retail evident which vintages. higher us financing full of replaced as grew auto spectrum at volumes we asset talked our about operational optimizing year-over-year and

increase volume adjusted QX, strong to without decision record credit consistent box. a risk which During our level we a at by representing applications, margins our of ability year-over-year, X% generate enhances changing

We increase past us and align origination of deals new With points return five seven-plus a XX% year-over-year, by profile our in XX% yields originations bottom the percent, also send improve dealer see five an yield percentage estimated RV years, the did timeframe. strategic that year-over-year. would year. where at same channel within each over can months, Finance XX higher least In toward portfolio approximately with with Transportation are exited overtime the basis the portfolio points And of dealers of coming an engagement duration growth increase on. and XX we not a you steadily up objectives. XXX month, the broader points a the higher right, around and average retail retail over new This basis driving book where of turns yields X.X drive over

vehicle increase Let's offset down $X Originations XX%. turn XX% strategic XX% XX. $X.X of continued $XXX in allowed positions QX non-prime while momentum to demonstrated the us we used an adaptable quarter-over-quarter slide franchise build aligned is to speaking, category, through that level, the shift impact where respectively, sales. steady Originations build. an million time channels our billion, prior lower the remained year. the at Growth performance. been and originations billion to our were versus these new in in for a here dealer past and with of trends accounted of used over years auto the in We've the mindful platform ecosystem real of At for Broadly long-term. has few positioning and

billion around right, in in balances. Moving around a year-over-year looking slight $XX.X $X left, commercial on assets average balance normalized to offset decline at billion growth retail is the at the balances grew auto to billion. consumer assets bottom lease And as $XX.X bottom

Insurance an the on markets. to by driven $X mainly Core income was Let's of turn the as year-over-year higher dealer offering. inventory premiums of $XXX $XX year-over-year, continued of prior rates income, plus net million reflecting up pre-tax and year. results $XX $X Written higher slide million, equity gains Underwriting our higher quarter to portfolio $XX by increased segment premiums earned million million to this losses grow. XX. of were Realized million moved higher million compared growth

and two Finance list see to factor our on by and through Core continue as prior are expectations, year has diversification premium in billion prior were portfolio pre-tax historic XX% continues segment to written our be QX Ending Those on of a as Corporate the was income loans We Slide reserve compared our balances. million performance trends separate year, our classified non-performing HFI been results. specific up XX basis, the remain $X loans non-accrual channel surpassed strong $X linked driven strong and quarter average. assets during to in overall exposures. million watch down have $XXX The activity over our within growth grew efforts. below and and QX. past we as and

our experienced execution focused Our across categories each environment, Finance intensely lend. deals an in we where remains team appetite competitive of disciplined and ensuring risk diversified with Corporate aligns our of

mentioned In the customer-centered of strategy this out our end-to-end excited We're underpinned of products. is are digital and enhance as portfolio this mid-to-high to over million this XXXX, slide clearly prior period of scalable billion income about economics the asset This pretax direct by based dynamics. and And level with this of remain at opportunity year rolling our the an in enterprise financing direct-to-consumer streamline We to digitally the and realize differentiated this We navigate which offering The with billion JB year levels revenue with loans. and prioritization providing $XXX at bulk the best-in-class originated begin as million an we we during platform rate summer. mortgage accelerated call culture million in originations at mortgages growth to QX of the $X quarter ROE partnership remain expect $X per as $XX Better.com announcing grow around our experience from we increase to competitive We with we of the morning. partnership, beginning XX, over this pace. aligned time. as of customers around space. $X.X net will consumer increase teens aligns and we the Through purchased grew. mortgage throughout remainder are

I'll handing focused Before it back by remain for value long-term our close building to we'll delivering customers our for shareholders. on saying in JB,

results successful and within our are of each business this our risk consistent direct reflection Our management quarter execution of a lines.

tangible an at over Our XX% value increase turn year-over-year inherent per And built $XX.XX, book the ending back of for share is testament with steady to it adjustable I'll time. JB. of a we've to accretion shareholders that, value

Jeff Brown

Thanks, pass to franchises our and laid traded year Jen. the priorities opportunities. XXXX Ally franchises for in commercial and pride on market are consumer in provider slide publicly our out and across XX, themes deep key On including dominant the focus since we of in In number a being industry adaptive remain year the prior XXth a several consistent will our our take long-term. finance future company, fifth ability for I've with XXth year our well-positioned and our milestones great since and our experience, what digitally year We auto launching XXXth advantage finance calls. XXXX, believe take corporate resiliency finance, businesses becoming Bank, demonstrating of in comprehensive,

for think Q&A. than now leveraging into the X,XXX can our more And mentality, your it are management future, interest at our At management. including and of of and capital stronger head and with our teammates thank right with build Culture company interaction Ally our purposeful you expertise we communities which We history that our focused on do customers I We discipline, within support. on a Center is every the risk for applied and a shareholders. behalf to

Daniel Eller

JB. Thanks,

Amanda, that start the to doing could question yourself and participants So ask please? limit Q&A you operator, Q&A we ask begin in so, a we'd the And one here before you follow-up. to one would if moment.

Operator

Absolutely Chris [Operator Sandler from O'Neill. Instructions] is the line of The first question Donat of

line Your is open.

Chris Donat

on my Jenn, some the the ask there look pickup Thanks yields I decreased originated to Good the then quarter-on-quarter. originated that but clear you I because remind and in they on nice of those, portfolio we're one on pretty the a for seasonality it's just benchmark morning. with us wanted yield, did rates the you the just -- rates can saw quarter-on-quarter, to rise average expecting in the taking questions. think like but

just So expectations forward? I'm trying and dynamic understand to there going the

Jennifer LaClair

Sure. Thanks, good morning. and Chris,

yields which bit. right. you're the typically drives have our as used that to go into year So, our you'll -- in runs yields And higher particular, segment. of half We the seasonality we percent absolutely in a originated shift think origination first and a it have the through our see our up mix do by QX, about mix used of we that

running So expecting full-year, QX, into yields. low-to-mid expect QX, continue X% level are that we'd to around be on X.XX% full-year for we in we're and originated of to range kind in the

flows to just auto In our overall just terms constructive at of in total the originations to helped which over support of benchmark, strong We're terrific across applications to $X.X see we business. quarter year had and obviously continue has a terms billion. expecting with pricing up year X%

as the expect row you're we were continue rates X.XX% retail total years. have X%, above portfolio yield to about about come for we been next to couple benchmark to migrate we've pricing our point while book we your the so last down, in would have years So yields XXXX. portfolio And a the was at maintain right, so year, far two up in yield The this of to on X.XX% last to over continue year. the able portfolio, absolutely

Chris Donat

on comparison say than year competitive some applications, applications, expect are then you in your this, a some comment you like benign here, can pricing Okay, I saw, on as it seems would thanks if give much. just follow-up more and you're to us a degradation ago you growing your where as the so a we grow or is related pricing, environment but environment it able you're that? can maintain and And to on

Jennifer LaClair

go. sure. It's steady Yes, you been as really

changes any in seen environment. We haven't major competitive the

use absolute terms seeing data got and to to of used of allows in well really application in high all-time and the able of what the JB the seeing in there's to when diversification dealers being the just an lend as opportunities that's offer we've market. and lean to continuing it the that just that there, in in us model terms think increase distribution as really you're there's is our goes, across is so XXXX, market, you're success, I as it into on opportunities we at our opportunities focus our back far the lean find as full a where mentioned continuing XXXX as just the to and product spectrum what dealer, channel,

Chris Donat

much. very Thanks it. Got

Jennifer LaClair

Thank you, Chris.

Operator

Thank you.

Morgan Our next Graseck question Stanley. comes from of the of Betsy line

is Your open. line

Betsy Graseck

morning. good Hi,

Jennifer LaClair

morning, Good Betsy.

Betsy Graseck

wanted bit we want eight to you expecting you it's increased just to for CETX as CETX did a to think managing loan be if an that you buyback is going slow you returns improvement quarters, get the the so growth, in could the during about to range, do a in expectation that just announcement ask bit? you four or to just I where through are average through the with to growth, earning going sense a talk wanted be one, keep are asset that how to that you down that next just you as the go questions; and it, Two to the the quarter, little made able

Jennifer LaClair

below consistent think sure. buyback book our especially Yes, underscores focus repurchasing, our on trade The to stock as continues announcement value. I

continue businesses Relative to across So, opportunities to we're there going pull not to terms the to buybacks. in back at X%, assets. no surprises grow strategy CETX our ratio our into of on lean to

as auto, with and on we we've to and finance; think in our our the better.com the in announcement, mortgage lending You retail corporate saw lean lending space in partnership home accelerate continuing well. can we robust just growth had

that to said we're The prudent get to capital been opportunities you and to high at So balance across what to pull better going also asset growth. expecting sheet we'll to organic we're continue it's growth. optimize. way back returns. ROTCE continuing build on our continue focused just is then, at not And look exactly ROTCE to all-on We've earnings

Betsy Graseck

Okay. Yes, that's And go helpful. ahead.

Jennifer LaClair

manage example that Betsy, that to auto, X was into keep add, mind our a think efficient, CET mortgage leaning versus just products for to retail so I so Yeah, capital the as XXX% were in ratio in about are has XX% RWA helps going well. that

Betsy Graseck

Right. and partnership you an the your that Could and of to that understand origination a be online, Actually what you on going relatively the thought in you mortgage you to current announcement made you over and second the you get us quick question to on efficiencies think around will migrate path. process that indicated kind you're leads with improvement the you how could timeframe originations, just much… help migrate able into how that

Jennifer LaClair

Yes.

Betsy Graseck

get of uptick you're to partnership? a margin much in How expecting this as result

Jennifer LaClair

sure. Yes,

to going we're back transition year. outsource So not over of around. through have summer origination substantial be should we from It's to to so and see our like build you'll go currently vendor But is ready the work really another. platform and one half transition any this the that the this we

just going are through a that just vendor and is higher. the And then factor just the it's One truly differentiated quickly experience to I The If we go our drive at we management we it and will be Now thing ROTCE exceptional customers a is for for Better.com, through really way things optimize successful it business shift. differentiating to our is a us. achieve against. second there're easy look two is experience and we want be and customers, to see this you in think this to that. for how

And efficient and it of terms our is believe in that we and front unique digital to provides. to as here of classes partnership. this industry very in fact some Better half asset terms an much operating pretty with gate mortgage out we'll incredibly have you think platform with other the be RWA of returns the get we've couple selected and new the We platform the in vendors of efficiency accretive requires that backend that other that will that operating the with we have the the

Betsy Graseck

Okay. And you're industry in is the whereas that going your point? going others you're be digital fully unique aren't, be to to because

Jennifer LaClair

and to fully that's our is terms going take down. point the front We've how selective very operating the careful in how to Yes, digital, platform, of very about back space. invested in piece we've we together office, been

some platform old and platform. on better operating move and have costs a coming just over based costs more our move internally much shed we'll will as efficient into We down those to originating we

Betsy Graseck

Thank Okay. you.

Jennifer LaClair

Betsy. you, Thank

Operator

you. Thank

the Sanjay of question Sakhrani comes next of from Our KBW. line

Your line open. is

Sanjay Sakhrani

what's obviously And expect just if car prices, that remain strength would strong just that about continue? forward? to driving maybe those Thanks. gains Good persistence talk about morning. used recently, question could going I despite a that have you how and fairly you strength strength then affect remarketing

Jennifer LaClair

Yes, sure, and good morning, Sanjay.

and sales So and escalate coming new quarter substantially used, have used demand proposition at price sales versus look a first vehicles a make true couple got the there's for vehicle vehicle down dealers of coming it's about sale into of customers, dynamics new as and new for from new X% value for actually the come actually saw well. here vehicles an great we then if to that's Ally been vehicles as there, continued down increased you more is one so has new a

guiding X%, of of we've about down the dealer as to been X% bit. to and kind peaked year-over-year I used about will we benefit the a think trifecta quarter down We've the if were it that outperforming used of vehicle benefit in say a Ally decrease down so came linked you prices X%, kind QX So to towards and we're vehicles, kind customer, our of been benefit look in to well. X%

we X% so as our model continue And well to this to assumption our expense, as X% the into into around residuals provision decline.

supply, of in expectations. with outpaced and into vehicles be have dynamics mind but peak terms off-lease the that and in off provision units we've here been to hit but year Now see the lease at increase in think both will demand market around coming has this to have just the XXXX demand we're million in so peak about outperformed the keep we as lease, far you've has watchful, manage got conservative as to I you as going in have and the the to we'll but the market well supply X vehicles just we residuals the our

Sanjay Sakhrani

Thanks.

maybe associated to under how the you C-car and Second like the and in regulatory as of well. relation about buffer return capital paradigm new about question CECL just on you capital could adequacy just think talk

indicative very or that's of paradigm guys share else? the So program announced. something something it new buyback Is that was you Thanks. strong

Jennifer LaClair

I our of strategy in we strategic think I buybacks. announcement just continuing let we to capital, book light our trade that's of me Sure. changes that buybacks terms fact our so, lean go mean to share in think of value no free into our share announcement risk there our I think use priority accretive the under and is around a very

goal on our and and out all to that horizon X% that financial relative the look revisit we we there As and framework time target health we out the revisit the we put the company. of

that We we and with we're CECL to and horizon changes and us now could effect consider. going the something appetite potentially SEB us. SEB with think at the for time that under opportunity. is in But point this on revisit risk Our is or to CECL it do continue some question to see right your may there gives X% level an

Now additional us to three opportunity but got our on fold in that it and to do think an in we management impact capital got this my it's take and opportunity remarks gives XX% really really normal processes. prepared you've phase an impact CECL into it opportunity for year in capital pre the new We and in that cut gives us in just fee as to do a mentioned to phase four I that years. you've have off an

in impact X% buybacks, strategic there, target. say in seasonal revisit around continue the is I'd significant to and lot we a think focus So manageable changes we'll our no the

Sanjay Sakhrani

Thank you.

Jennifer LaClair

Sanjay. you, Thank

Operator

Thank you.

next question Jaffray. Piper from line Barker of comes the Our Kevin of

Your line open. is

Kevin Barker

Good morning.

Jennifer LaClair

Kevin. morning, Good

Kevin Barker

ratio the the have follow-up that your in one which on tangible a group the addition any your consideration the appears common peer ratio the it Just you you the and XXXX? more equity go in one be given sheet, sub late mortgages TCE with on CETX X%, especially may the lowest to or would capital, growth amongst with balance into go time around addition of we probably as XXXX/early buyback combine of mortgages

Jennifer LaClair

remind fully returns that grow CETX that Yes. we're we everybody but just getting do more well a focused focus metric the as something to a growing is as have Keep looks at, sure our of on at right it's we we And in a mind, very TCE think have that as so know CETX. I constraint. mindful do we it binding the returns we continue the lower and are going balance much mean us making of we'll our earnings, our sheet on may kind collateral. to valuable we'll that's X%. growing below both a organically, that and for bit secured and do to we be been just We we've look industry capital like continue

Kevin Barker

especially to you've lower the efficiency Okay. this quarter you moves And the overall as do improving as some you the deposit with then, so of far made expenses Great. made base far. the as operating given drive asset and expect efficiency in of continue to in the percentage

Jennifer LaClair

grow that operating don't we specific growing expansion big to across our expand level earnings opportunity leverage. target. lean home to all we continue businesses. our a just Ally our to cost to expenses, to for On than variable of expenses we're focused that opportunities investments dominant and but of for term to on don't of There returns faster trade see going of drive want continuing to we long Yes. consumer What business. We're have is build term on revenue our a is of very opportunities we're businesses mindful short product going that. so best and some in our adjacencies ally growing in new like and to attached to franchise continuing to in out We're a continue all and lean

we'll manage operating focused positive we're that. So short is and leverage expenses answer on within

Kevin Barker

much. very you Thank Okay.

Jennifer LaClair

you. Thank

Operator

Thank you.

Our Suisse. comes of Orenbuch Moshe next from question Credit line of the

Your line is open.

Unidentified Analyst

growth talk years credit. what the of origination and morning. about applications dealer is actually what [indiscernible] on we're the expect might growth at higher strength yields. strong for active We have next yields role loan few Can dealers and might James This in and Good be and over on Moshe. you what Thanks. origination surprised were in we active applications the for might and impact origination that playing yields wondering

Jennifer LaClair

Sure.

the our about continuing look diversification on five we're of has to and channel the metrics growth all and I the over applications percent that's and of mentioned to focused to shared those distribution. us apps strategy dealers metric time. see percent within growth whole grow or engagement that growing giving the for further dealers five-plus continuing opportunities JB around fact around with each around coupled is in more continued Our

So, engagement continue the you're network. of We're higher the to distribution absolutely drive, and our going to our applications see distribution network right. through

very we to While we our put that grow allows be our balance and us flows also we sheet. about on picky have grow applications, what applications we proven, which

your underlying that come down, flow And allowed has applications us made It's maintain new continued earlier, have yields yield. benchmark but so of just hasn't. pricing to comment the was

flow. we continue going As go the through we're to focus on the year, get right to sure we making

that yields We have continue to portfolio the and of drive our range, time. X% origination total expect kind up yields will low to to in mid over

Unidentified Analyst

there runway engagement drive think dealer mean, I makes That's do program. much a it's you space, gross rewards sense. but the good working always color. guys which channel, competitive you're to more we on have And said you a is? you How know

there? talk can So what to expect we you might

Jennifer LaClair

think our within to within Rewards that new going I'd two the as players things. and in programs last continue years trajectory number mean, but look only focused demonstrated team to the the And Dealer to you're that that just growth also it's that's the we're has One over the bring flow, to we've it's of absolutely growth we channel, those at quarter is bring right be of amount that to helps is need Ally us and we're level dealerships, Carvana, the to the grow the number, to of I to in traditional going dealers. sure say I growth we're CarMax, Yes. not some going the our also and getting going couple then over engagement model but is and that on last within, focus both continue leaders those. the to continue. space and we're to the the in dealerships evolve the And right, but to diversify and really DriveTime we of continue making And we're in this where the market, of continue channel. this second

Unidentified Analyst

you. Thank helpful. That's

Jennifer LaClair

Thank you.

Operator

session I'd back Thank for Eller turn Daniel conclude the question-and-answer call closing does Mr. the to that to you. over for And remarks. our like today.

Daniel Eller

Great. you. Thank

our So, for thank today. joining call you

have any reach questions to today's free to additional please do out you Relations. the Investor feel concludes call. That If

Operator

thank program. for Ladies today's participation the This you and in gentlemen, your conference. does conclude

great a disconnect. You may Everyone, day. now have

Ally Financial (ALLY) 18 Apr 192019 Q1 Earnings call transcript