ALLY - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2019 Ally Financial Earnings Conference Call. At this time, all participants are in a listen-only mode.

I would now like to hand the conference over to your speaker, Mr. Daniel Eller, Head of Investor Relations. Please go ahead sir.

Daniel Eller

we quarter joining XXXX and Ally to operator, third Financial's results. you, appreciate us everyone review Thank This morning, review we remarks. our to CFO, have your our CEO, LaClair take the Jeff on call following to questions our and Jenn results prepared Brown; and

can reference today's the presentation call website ally.com. we'll of Relations section our the find on You during Investor

Please call by risk I'll have our we language management direct presentation, assessing supplemental factors. these definitions contents are X, keep some the to The where we've and by your governed a core and core attention they and believe supplemental of investors to of used to and the These are for The will performance of Slide on in operating include measures. not our US GAAP measures today's statements and useful end other this full reconciliations. non-GAAP Slide and be measures. results. in are X company's substitute slides mind, we capital included forward-looking or the GAAP at and

Jeff I'll CEO, over turn call to the our that, With Brown.

Jeff Brown

from you, quarter. Good Thank thank On highlights slide everyone you number Daniel. X, and cover will our joining I for morning call. third

the midst financial me by that quarter, continued execution strategy. saying Let were of market volatility, ongoing begin Ally's solid the of in results reflecting this again our long-term

needs to customers. trends Ally trends accretive the deposit customer and and of growth where continued, were where auto Progress persisted, Ally franchises, pleased robust, are remain affirm, and across remain and performance our meeting offerings We pricing our with in preferences Invest flows we Home results. our

steady. quarterly exceeded prior Core of $X.XX up compared $X.X increased XX.X% our remained a remained the highest result going since public. Revenues of ROTCE while profile to Adjusted billion, X% risk solid. year, XX% year-over-year, EPS our

vehicle used vehicle originated slowdown XQ auto applications. by increase new remain billion our light consumer well decisioned robust. level, the auto, our a volume and capture, sales at higher leases lending major In in evidenced 'XX in across million Despite of dynamic the and of originated is the versus platform some sales, to quarter, loans $X.X we finance year-over-year The we XX% categories. X.X shifting positioned all

X.XX%, see where Within when and new DTI declined balanced PTI. average while rational on to a Competition healthy standards LTV, retail -- our XXX remain points. yield year-over-year, in FICO, thoughtful book, of consumers' the we loans ebb continued and was we originated space, underwriting pay, indicators remain essentially remain basis steady flat Our benchmarks the in at but flow behavior, and term, overall. a ability and trends looking to including

XXX% it but we in priced diligent accordingly. remains you across risk and yields stay rates Fed time, over evidenced observed would continued well below lower rate easing expect as behind the trend we the retail have broad reach profile, expect, Ally's as rose. origination We to level would by cuts unparalleled us market-leading and bade us forecasted, two With position. our our actions managing scale industry, and

the with the Over interact trends. into behavior market with real-time consumer XX% U.S. and dealers us providing benefit added of now in franchise of Ally, insights

of Our X.X volumes decisioned million dealer over the count has past in XQ, leading supportive continued five of consistently to a applications and years, grown expansion record adjusted healthy returns. risk

X the to XXX as higher basis by retail points basis Credit compared a points prior line year. moved our modestly auto charge-offs this performance in net quarter, remained expectations with of

growth a and service a to prevalent, outpace healthy We levels low, remain is unemployment debt inflation, wage to are continues well managed. XX-year continue Jobs consumer. see U.S. at

highest past been they've a two are While overall consumer confidence the decades. recently levels moderated the bit, over near

at trends, monitoring which although continues a on constructive remain GDP the we're consumer, Beyond the to and trade but expand, including manufacturing outlook, business slower developments, pace.

$XXX offerings. were ongoing million wholesale premiums fueled product Insurance level our in and increases, by expansion channel our in and retail five written highest sustained our XQ, In years, growth in segment,

a Turning the new XXX,XXX in this by surpassed With adding go over growing XXXX billion billion retail balances already to X.X in ending XX,XXX the deposits; with total respectively. surpassing period customers this we we've and in and million quarter, quarter exceeded quarter, full $XXX net deposits mark. year, growth another $XXX $XX.X to billion customers, this and year balances

Over retention growth XX% growth; by focusing customer times being averaged and done annualized this deposit nearly decade, retail industry the retail Ally relentlessly on rate. to the has the X.X past We've true deposit our performance, brand, on consistent strong minutes. is Jenn by a loyalty with high in provide evidenced our straightforward Customer will few details vintage offerings. which and digital levels innovative value, more

our worth financial journey. of with account establishing net the in mass of are while us millennial from openings stage high banking affluent, individuals, cohort, a an from their XX% are balances customer early Two-thirds relationship at

products, with array exceptional and to us with consumer the hand same broadening we in offer, go opportunity for the presents of tenets the our the to desire the increasing future. of over the look service, This and in customer philosophy. continue applying offer time. deepening products relationship core framework seamless We're hand convenience, The to

responsible another increase HFI diversified portfolio, returns, Finance growth, compelling a while and and operational posted quarter, billion, solid balances credit with ending XX% year-over-year. The Corporate remains focused with cultivating risk. team $X at prioritizing on a

we during million X.X originations higher in the originated times year $XXX than what Ally prior were Home the DTC period. quarter,

better.com experience accelerated customers. best-in-class with digital our to for a partnership ability deliver our has Our

with advisory we XXX,XXX. Ally grew out Invest commission accounts fees trading and XXX increasingly been announced commission managed recently During trend In a product third new September, the at XX% anticipating. free early along ETFs, industry with offerings, including have rolled we we and ending over year-over-year, quarter, free portfolio, zero

our overall. customers increases account multi-product from and customers levels of is retention Invest for Year-to-date, stickiness. have value and higher enhanced to XX% customers, existing brings around deposit been openings these

consumers seamless the upon made we've earlier in based has sources momentum We building were the we of to We closed in we a an of to established, rating to transaction the Ally. during payment team Charlotte use manner. month, the forward this strength an the HCS progress And receive leveraging grade to XQ, investment XX significant pleased and welcome acknowledgment our desire digital growing teammates enterprise. from Fitch, alternative of look

to Across quarterly XQ, four always not slide the trends XXXX. a left the each XX% deposits increased of year to to per on number from by turn have grew upper right, In long-term nearly year-over-year, EPS we XQ share, our billion, compared improvement Let's total while ago. in net while of of adjusted increased $XXX shown metrics. our the upper the some progression $XXX million five consistent. here, $X.XX measures $X.XX revenue been to recap Adjusted continued strong linear, of

On the bottom right.

We have up risks increasing to and the continue year. right horizon. $XX.XX prior confident of people building remaining we on per tangible right the mindful share, to strategy I'm while building potential business the versus on continue momentum, book value, our XX%

that, With turn it walk Jenn, through the I'll on to over the details to quarter.

Jenn LaClair

Thank you good morning and everyone.

QX the Our strong models, focus reflect business relentless continue in our grounded customer a progress of results and in consistent discipline. to operating

book higher and results NII replace origination above higher continuing of million a auto remained where continue revenue linked Let's increased moved begin and wholesale financial year-over-year. move to of $XX and was review excluding funding. pricing optimization, on to X. expansion benefit The and OID X.X% dual Net $XX slide where rates billion of million $X.XXX portfolio cost steady the the by of quarter, financing new yields driven our lower, deposit growing detailed

quarter some we Despite the linked though several next rate on will grow drive basis environment, volatile seasonality to year-over-year expect a QX. we expect fluctuations, quarters, NII in the over which

million and million asset revenue reflecting $XX $XX seasonal other revenue Adjusted trends $XX year-over-year, insurance. year-over-year, growth $XX of grew, gains of million quarter-over-quarter normal and solid $XXX million million $XXX investment Provision increased by higher. modestly driven charge-offs million and moved grew expense net as levels from quarter-over-quarter and

remaining basis consistent charge-offs net our with increased by Auto expectations. X year-over-year, points

the we've been originating and have X.X% net past, discussed pricing in X.X% to charge-off to As range. we

strong macroeconomic strong near vehicle prices We expect XXXX, at this to range year factors for to used outperform and or due levels. historically full

declined accounted remains is weather and same. compared overall quarter, portfolio losses, linked will Non-interest We to of remain our trending time, of our range the the Losses continue toward year. outlook fully X.X% X.X% over prior the performance collection million in the which in stated and expense million to confident for the lower underwriting, and seasonally approaches. $XX increased reflecting pricing $XX the

leveraging operating of positive leverage in strategy. this quarter something again the generated this outpaced X% and X%. made of over past scale investments we've Efficiency We years the growth of with our done every a long-term our revenue aligned result few opportunities, quarter, as direct growth year-over-year gains are we've expense year,

with of to continue result the We will driving efficiency objective over improved time. for growth parallel prudently expect in the investing future, to which expense

including ROTCE ratio XX.X% since GAAP quarter, the per for metrics declining elevated OCI were key rates reflecting and of Core XX adjusted our year-over-year. XX.X% $X.XX efficiency share. Adjusted $X.XX at Looking points and basis EPS was improved year-end.

our remain track original million provided expected included and of in year impacts year-to-date, full to January. to XXXX Given guidance the million $XX the HCS despite progress in our we to rates we significant This acquisition achieve QX the shift in outlook. is on not related $XX

are I'll steeper generated the sheet expanded are balance Like to X; most over financing deliver not and dependent curve, review slide rates. again we we revenue growth prefer revenue this sheet term, but and We overly margin. we a as balance continued quarter, to banks, through Turning near optimization. positioned expansion on net

assets grew earning efficient primarily categories. capital X% Average year-over-year, in

the moving prudent objective. as efficient our ongoing to we've growth, We and modestly grow but portfolio, earning expansion forward, finance investment auto capital growth corporate diversification slower expect mortgage continued remeasured assets and and assets, loans, consumer neared XX%

grew was On X.XX% of billion side, flat margin the billion year-over-year, growth roll-down Net interest unsecured billion secured billion, increased essentially . deposits year-over-year. funding in five $X OID earning $X and financing of $XX the nearly basis linked excluding and quarter lower of points funding $XX asset average

said now, we NIM stable for we as full to compared NIM expect As drive sheet into expect balance some but relatively we XXXX year XXXX, move dynamics XXXX, we've stay expansion. to to for time

X.XX% year-over-year, quarter-over-quarter improving portfolio portfolio increased X auto of XX resulting yield. another points in yield basis retail points quarter and The of basis

reprices retail above touched monitoring consecutive mind, competitive increasing earlier, on we've to benchmark auto generated in new expect continue Keep as six book JB yields dynamics activity, portfolio X%. are quarter. each of and XX% we yields our origination As quarters around retail of but

the was yield X.XX% for portfolio The quarter. lease

Our for used outperforming essentially remains decline year-to-date, flat the our to X% X% year. car index expected

units highest level While for consumer to the continued of X industry the used volume at years, XX demand has exhibit strong million off lease plus in is vehicles.

Keep this improved and a $XX,XXX, exceeded as new XX% reflection year-over-year. The mind, durability points linked and closely increasing in points financial commercial quality of asset versus and their and XXXX. price of transaction which declined difference month in rate on auto a increase XX healthy a used recently basis an XX one increased between see that average lag. yield tracks LIBOR portfolio vehicles, this cars, is trends position, overall quarter, a We used basis floating

grew deposits of While side to will X.X%. balances funding parent balances to $X XX% mature continue liquidity the we of end issue scheduled decline, another funding, of X%, overall On XXXX, periodically expect billion to to the to as with is an while overall coupon purposes, for declined by unsecured average

slide remain the On deposit retention QX strong total while In ended growth [Technical of marks of levels cover by right, highlights. deposits we'll X, driven consecutive billion, XX%. $X.X above Issues]. the some billion, retail quarter at $XXX XXth upper customer

Daniel Eller

there? you are Operator,

Operator

Yes, here. we're

Daniel Eller

off. a we're technical difficulty, left we had pick going up but We Okay. to where

Jenn LaClair

deposits resume $X.X deposits retail on $XXX I'll In retention total driven by billion XX%. slide levels of billion, the customer we're growth recovering remained while at So strong above where upper X, ended highlights. right,

year-over-year of of third two-thirds growth a from existing Year-to-date, sourced marks to digit quarter come percentage QX on customers, double balance around in customers basis. balances. from the their remaining our new XXth adding consecutive growth the while has was portfolio

traditional the of platform in to the array We've both space, emerging long-term and players Ally, increasing seen the of reinforcing digital to strong value customers from and demonstrate proposition stability but an competitive our balances and loyalty continue our offerings

actions trillion where there declined From perspective, the past a to In over from left, around continue $X months. the traditional X come deposit pricing of basis the net XX is points. funds basis balances, several banks, of linked quarter, earning under points flow retail majority inflows bottom of reflecting rates

we be loyalty observed rates continues and remain for what overall we the beta than maintaining a As pricing the we've as time. catalyst to focus increased, the But cumulative our decisions expect trajectory. earned Fed NIM to we ease, our as on positive will balanced, over customers with the higher trust

growth. third of and period, our On growth strategic us quarter The funding XX% our our well, XX% and strongest XX% to and the customers we added balanced aligns as XX,XXX new positions was resulted bottom in remain strategy, right; mindful deposit with net year-over-year deposit during customer value we target. the which in

a On Slide deposit vintages included the we've the our demonstrating X, stability over of chart, past decade.

their keep money balances. and grow consistently customers us their Our with

has we we you industry. Our the leading can have action took bottom direct And broader positions rate even of of the competitive us remains rate been online widened the on our our industry large gap payers as the top product, week, growth while deposit the the banks, achieved, which lowest chart. context see last the as pricing at among to in savings

of Let's approach by managing CETX quarter of X.X% X%. year-over-year, and our to earnings XX; assets, growth growth and grew X% year-over-year, to capital earning which disciplined on linked move slide compared reflecting asset increased average to risk-weighted

mid-XXXX reducing this impact closed the during shares an and since and repurchasing QX. continued month we associated expect XX.X% shares capital outstanding earlier by HCS in We quarter,

currently to pertains reserves auto. consumer increase XXX% we estimate it XXX% will to day driven one CECL, As by by

for proactive capital the to We position have been in given CECL, phase-in XX% planning four next years. over the the annually of

we life loan of expect reserving in and volatility macroeconomic implementation, move as earnings, CECL fluctuations potential we go in increased assumptions to forward have Following

growth our in increase we a management, as of navigate dividends. risk and underlying through prudent absorb ongoing our not balance material the reserves, sheet strategic deployment, while investment We the represents to capital and including balance buybacks CECL, to prioritize existing share to one Even day sheet changed. this of continue impacts accretive plan opportunities, has profile

XX balances slide $XXX an details. points was charge-offs. XX expense of auto. quality driven of increase primarily asset In X auto top million to higher basis quarter, increase $XX basis right, prior by year, net asset to the points Let's Consolidated due an moderately review were to higher charge-offs year-over-year, million, consolidated compared the turn and provision to this retail net

plus dynamics retail delinquencies delinquencies to six trends. in discussed bottom plus left, resulted reflects right charge-off bottom in our by the delinquencies, purposeful points improved earlier. and in rate and to consistently used reflecting basis the rise I seasoning XX The servicing our the net XX the year-over-year, The increased In X basis X.XX%, year-over-year increased of change have respectively. this loss flow mix increased in points quarter but and increased portfolio. efforts XX to

income by seasonally payment timing; on slide higher finance increased $XX financing closing a Monday, revenue quarter, impacts which to In of declined out auto growth linked XX, dynamics quarter growth asset provision, around yields. auto the million on compared consumer and $XX and increasing pre-tax was to $XXX million retail Net driven due million prior year. portfolio

in a new $X.X reflect declined. our have XX% billion improved in right, in trends the originated We QX, our third year. increase of QX, expanding meaningfully ever million relationships in even prior volume benchmarks versus as adjusted volume, origination year-over-year dealer leading In which X.X XX% apps application decisioning and in the return consecutive strongest XXnd bottom quarter increase, quarter to resulted experienced yields, over risk

in and total percentage increased remained to originated though year quarter. QX, originated declined non-prime new XX; total we XX% a volume and volume $X.X volume loans XX% prior originations, higher of consumer of Growth near Slide the consistent. in as while lease to Seasonally our compared of XX% volume resulted period. in used leases in originations of billion of the Turning dollar

the originations year-over-year, lower percentage of increased. was dollar While use the amount of

quarter-over-quarter, left, and as year-over-year bottom to retail lease to declined balances the normalized. And on balances the $XX.X consumer billion inventories billion right, grow. In continued of commercial grew average slightly as assets bottom dealer $XX.X and increased

an prior the Earned and year. million $XX trends strong premium increase pretax million income On $XX over written revenue past $XX the linked $XX year-over-year, reflecting of versus core million XX, slide million in several increased quarter, the quarter of Insurance reported quarters.

publicly We from first receive in years QX, Best, to an XX increased the of the a product to upgrade And company, rate volume premiums level AM $XXX upgrade million in Ally pleased at minus across highest our wrote becoming we quarter, with our were since A Insurance. traded and offerings. during

linked down to assets ending our grew remained $X and our million million line with and income Slide expectations. credit in HFI Finance Core year-over-year. Portfolio period, $XX increased XX%. strong lending of in the originations nearly of XX% million pretax Corporate XX was to based and increased quarter new has compared performance prior results. segment Collateral $X year,

Our origination experienced, from to cycle who activity reflects focus continue execute environments. our through tested competitive teams,

volume and as million increased On declined highest Home. Ally slide prior year premium direct-to-consumer quarter XX, mortgage was pretax million income We launching since reflecting prior loans, level of originated versus nearly of quarter $XXX amortization, the origination increasing relatively prepayment rates and activity of in fourth increased. flat consecutive periods, our $XX

continue from depositors existing XX% synergies, of to Ally with see We direct-to-consumer strong deposit originations sourced

with The drive including a Our approximately times leading and turn better.com, over best-in-class XX to all improvement days, loan time. XX% fund will streamlined declining platform after a and improvements in of partnership led industry to the experience customer series cost-per-funded scores. NPS digital

solid had quarter our focus for on financial leverage created and pre-tax customers year results the In driving another closing, long-term businesses gains, with income sustainable that growth, pre-provision of These our we shareholders. demonstrate value strength our objectives. successful progress XXXX delivering for full our our against and core and ongoing operating

that, turn JB. to it I'll back And with

Jeff Brown

thread number Jenn. priorities you, slide company we It's we're how are Ally. our at in The for of these each on direction. culture our Wrapping prioritization Thank ensure right running of the XX, our common objectives the up driving through company. is

the enhance through working we're as will established seize customers' put, auto, deposits, to upon commercial in our leaders comprehensive that we untapped and meet bring and value needs. opportunities, way insurance offerings, further and looking to we're increased consumer Simply and innovative

associates behalf interaction and we of a of our quarters three ahead, It has on within the with do months every been we're to Our our well and coming the X,XXX into serve, striving in focused are years. and on over finishing customers, shareholders. it strong the the year, right communities great Ally

With that, we can now head into Q&A.

Operator

JB. Thanks, [Operator ahead operator, Instructions]. Go

comes question Moshe from from first Credit Our Orenbuch Suisse.

Moshe Orenbuch

down I really to Great. drill to being able little lead and on direction about in mean, how I about Jenn, wanted little results talk about asset deposit kind you've pricing. there you side? given little particular, such strong results. talked congrats had of Thanks your on strong a the the a on strategies yield and bit a you that, think in downward just and bit,

Jenn LaClair

Sure. Good you. morning Moshe and thank

So across really pleased we strategy, deposit I customer no the the we're with our we're seeing. look the deposit we're changes mean business, flows to as overall growth seeing,

In fact and through the of we company. that deposit had history full of year QX, customer levels we've had the the highest in in growth any

pleased to focus well on deposits. there, we'll strategic So and really have customers, continue as growing as

pricing; close do as to really to focus so, we as XX% and Now our mentioned of to position balance priorities. grow feel XX%, relative thoughtful, margin, be to want to we continue and rate we're to business. do to we're getting on funding target in continue we that I a to competing good our We

the also to optimize margin. want We

will be really We as we that about go just forward. thoughtful

optimizing points, of the You've expansion think as paid under points, go we us the since Ally's well. a XXXX $X getting optimizing, positions into couple around around really for think exceptionally NIM and financial and margin, position there rates as XX basis from not and we've down trillion we're well the for customer CDs dropped OSA months bank have out seen only June, basis last overall customer, with we over to XX come relative trajectory, points, the -- XX for basis most but that rates ourselves we for

Moshe Orenbuch

a in the And operating leverage, how that go ability the next I to you guess you of I would does kind and to the to have due leverage, on question have the, have through related, the coupon. operating of end think X.X% the I that you by mean relates of at that kind continue debt XXXX? talked somewhat comes make about as impact you that you. Got year, of and kind the about deliver

Jenn LaClair

Yes.

XXXX, operating driver really of all we around as positions a coupon. grow to down, the down leverage. unsecured going this cost really but income NIM, So, in us to move high first interest debt lumpy, overall at and to quarter to I bit an Relative be revenue growth rolling which into big and is -- debt X% a got revenue coming net the continue it's mean little we've some

of and unsecured, an the just it's And overall NII NIM so we'll and cost, again, deposit input to the roll continue lower down trajectory into

Daniel Eller

Operator, you there?

Operator

Yes. I'm here.

Daniel Eller

Moshe, you are line? the still Okay. on

Moshe Orenbuch

I am.

Daniel Eller

difficulty here. getting were a We technical Okay. sign of more

Moshe Orenbuch

questions My Thanks. answered. have been

Jenn LaClair

Thank great. so you Moshe. Okay, much,

Operator

you. Thank

will Our KBW. Sakhrani come Sanjay next question from with

Sanjay Sakhrani

Good Thanks. morning.

appreciate macroeconomic bring. there guess you sort related I CECL, Jenn, thinking the the the EPS be? assuming the any But about when impacts, impact might So are will But volatility we're mentioned estimate stable, impacts. of commentary variability is rough I of and it on what EPS conditions

Jenn LaClair

there as we'll providing plan. a number outline just let XXXX mean essentially, a that more And at you two around of couple Yeah. be a But volatility, look when day and finalize I is bit me of we our those. [Phonetic] guidance, drivers

increase The first an month see going you're portfolios, a to outsized loan. of to loss XX growing is, your going you're you're again, model reserve levels, because from your life in incurred if

your So it in depend the degree on to of each portfolios. some will growth

just each will across it's of the but those And to then Second, to that's mix, book, within the extent risk also your assets last not forecast. your some macroeconomic of be but it your asset least, content to and on your depend mix going tied classes.

our do around to EPS need some give the trajectory we settle when our and sensitivities overall CECL. down overall So provide we'll company, forecast, so, will we for and you

Sanjay Sakhrani

more what year. year. when related guys being on pretty was a to you Okay, higher that have pick and targeted the a than this But was decent rate, charge-off or delinquency that all run quality, look the level consistent up little a and great. solid at there delinquency the Thanks. Was quality rate have follow-up quarter performance related we Obviously, it is normal bit year-over-year. on in you the guys with had rate. a next credit credit bit And I to you guess of had year comments that's timing, some this very of little third a indicative

Jenn LaClair

sure. Yeah,

say So well of expectations, is and on increase of just is delinquency, overall the kind with performance yeah, the used drivers and portfolio. our the expected three year-over-year. to One I'd normal in seasoning line

risk around We've Keep the fact that for paid used that talked to in to yields. get content. three higher four we some mind, tends time slightly in have the times

So segment. returns we're really in with the that pleased risk-adjusted

is, But it and and does then some higher of that say drive some with launched and what well collections delinquency frequency, operational expectations, and through some impacts. QX, and four seeing last I just here to just One again, quarters repo our pushing the increasing line just, we're that's strategies levels. new in in coming there is servicing a couple would we eight over the out of timing

due It's pleased does with result to terms in volatility which some higher almost delinquencies, day nuances and performance drive fact these delinquencies. third the of Monday increase in overall on And Friday. improving quarter that just we're loss but of can closed say I'd in a instead was a in it with, the of that a that there closes, some flow the slightly of your that is to strategies, quarter the the then just

net on to that at in originating some we're because to expectations, -- your So X.X% ratios, that's going, where up retail X.X% we're migrate expect would simply to today. we where with line question to overall, charge-off point,

sweet occur, severity more risk-adjusted where X.X% have our we time, drive values to over out increased that with still we're vehicle start in And migrate mind portfolio pricing to line the in and in so to as some expect season, returns that and range. we'd so Keep as spot. to to we'd used be used we're X.X% that's expecting -- continues

So we're good with that.

Sanjay Sakhrani

great. right, Thank you. All

Operator

you. Thank

from comes question next with Citi. Our Cyganovich Arren

Arren Cyganovich

you wondering if impact fee? from in could perspective I be commission on I could just comment decision for the that direction you? the potential industry what change a and the is to Thanks. revenue was the moving guess,

Jenn LaClair

Ally it's morning, second just of Good Yeah, The percent revenue, and extremely Arren, I'll first. maybe small tiny. impact take a for overall us, as is sure. question the

it's So from a financial a non-event. perspective, pretty much

so we increases be JB perspective. customer time, we of a in business, of From out, that very portfolio, mentioned, the there. capital-light. we're and much more of from building the move like in accretive and perspective, think still process it this deposit to as the levels retention value see stickiness that over this our it's advice-centric And can we an an model, ROE we

here is, want move line some when valuable that. have bottom we the position. don't mean, ourselves moves, if didn't comment the you it, customers industry that want with JB we to you otherwise I I on put But to lose and in to know

Jeff Brown

covered, Perfectly Jenn.

You got it.

Jenn LaClair

for you Arren. question, the Thank

Arren Cyganovich

ago, and the is Sure. afford an as terms. on a There there the underwater follow-up. middle Street kind purchases -- And able and days, a these extending class talking just loan about a was few rolling new weeks of over article Wall the Journal being car not to of kind into loans

where about your or that? you're seeing curious auto finance? standpoint, comment seeing that the just in your that anything a nature, Obviously of we're concerned you trends anything competitive would that seeing about you're from what not rates Are within be charge-off

Jenn LaClair

how fringes, always on Yeah that's business. view to really commentary look, I mean, to we paid overall be that attention the the going and there is

our which As in value. we to loan changed FICO consistent business, and look originate nothing in at of the has we scores, payment way we terms his to income JB in see comments, mentioned scores, that extremely

of record if we've think application in put you our just to seeing servicing so under are contrast, robust see as year-to-date that credit ability right I actually is I flow. and in an extremely just well, to at to continuing any incredibly as be seeing continues strong, the terms able in of now price consumer, employment. XX%, at performance, levels in right XX you quarter, the XX-year Debt this market. And consumer We're pay applications be think kind to performing deterioration got low. it. We etcetera. just They're a not well term, the look We're and not had

Arren Cyganovich

you. Thank

Jenn LaClair

Thank you.

Operator

Thank you.

Our from Hecht will come with question Jefferies. next John

John Hecht

guys. congratulations and quarter. on much a good Hey very Thanks

about thinking terms last margins, on I this see I'm a in where new do loan just of not loan, terms loan, little And new touched kind the yield new, loan are incremental moving car guess, new in and the You you durations. not -- but yeah, but question, bit going? volume, market where new wondering competitive of

Jenn LaClair

Yeah. we've around at I at auto, XX all. has on changed. I just consistent very term not has that year-after-year, not been mean, months term retail and our mean changed

one. question I guess So answer that's to

Just in robust terms of yields, yields. really

are We migrate those new think consecutive continue origination to yields origination to portfolio the very had a for see new generate asset quarter yield X% at ability from in quarter to speaks we expansion positioned on continue flows, up performance with yield I terms books our over yield putting on of drive and X.XX%, perspective upward portfolio that the side, sixth this yields, of the to well and really to itself

Jeff Brown

And really you on about quarter. sure consistent. an John, didn't competitive share see very that one the I'd third it Obviously say didn't they saw front, took large we increase talked on. and the in in then, I'm But bank feel it

are covered flows been to of bringing very loans Jenn consecutive for with in new quarters of point pleased were the the think margin I where six strong, there. we been capturing our added we've we've exceptionally at,

shifts and big any competitive in remains appetite at I'd So haven't we the all. or rational, say, very lately structure environment seen

John Hecht

is, talked mentioned on mix just and historically commentary you've the forth. think we think mortgage -- Okay, am you about so appreciate wondering, lines partnership. mix for what been enter see we diversification? your as new and -- had incremental I in and year focus working we do better.com next color. lot follow-up business toward And question you've ongoing you're of business kind And that, capital order with diversification, management, some also have positive that guys I about on a might

Jenn LaClair

able an our level, mortgage it's is auto, and because At expenses. the see better.com, grow of to bring and operating key partnership you're high to managing as with specifically that's we to to over be have a those able we're that operating we well, all accrete with and the expenses, to portfolios, opportunities in as we time, space, business mentioning opportunity ROE down mortgage that see the

we a $XXX billion-ish nice diversify our point to another at X% year, have We sale market with to a as in and opportunity the drive lending, just to XX% It's the growing X%, acquisition of HCS so transaction opportunity continue a that's with closed to drives see we really through well. ROAs diversification. HCS,

John Hecht

guys. thanks Great,

Operator

Thank you.

Stanley. Betsy Morgan Our comes from with next question Graseck

Jeff Adelson

Good Betsy. Jeff Adelson morning. This for actually on is

Jenn LaClair

morning. Good

Jeff Adelson

Just wanted the to revenue lines into other bit. a dig

seen in is think I you you've actually not-to-distant million to past, the of and that first being $XXX the several in quarter quarter-to-quarter. $XXX $XXX the talked about range million exceed this kind years, fees the of in adjusted million

the time. seeing quarters of last So in in you're Ally the business, gains had you've some and results good that couple business good some Invest over layering insurance you're obviously

I my normal, early is, million So new $XXX how question guess is think or think should kind forward? of a too the going we to plus as about it about that

Jenn LaClair

fee income. absolutely focused mean grow to would Yeah, I non-interest income quite we we're on fee ready to say opportunities do yet. continue I growing not you see I lot our mean, guidance our of income. I'm to and our a give

and becoming expand is also lot premium, insurance opportunity levels and more Insurance, We're more you it's assets only way margins. that to we critical record earned you're see take in continued and the time insurance, record saw not continue the -- we all the gains businesses Inventory the written opportunities levels premium, that's the insurance had and just by up premium, to a the we seeing provide, show that that over across momentum portfolio. that earned seeing of in in of on in our our and of dealer to which space. business,

So we investment some around growth as securities investment rising rates relative position, harvesting securities gains to portfolio is second, were portfolio, I'd a and kind as in of absolutely strong so we're us. grew for well. a really our insurance say engine our

as you as think to grow, capture we're well. Ally secular space. Invest then It is to this And still especially business. and very mentioned, the in over time, trends those to We supported we advisory digitization, by positioned opportunities growth opportunities we're well there's think that on bullish

Jeff Adelson

I had. That's all

Operator

you. Thank

Our Kevin comes from Barker question Piper next Jaffray. with

Kevin Barker

Thank you.

the that over some up few I first expenses talk the expense could in about increasing of you the the driving quarter you've are trajectory quarters things little we've and ticked seen for could bit expenses the this half. in occur. just next the Your to compared growth the mean mentioned a that third But that growth?

Jenn LaClair

do is as themes been same around our growth we've year, and really positive intention, discussing. focus And specifically to every sure. and the been But we quarter that our Yeah, that really this I leverage relative we move forward. in the has growth that is leverage, driving that want driving to been the -- operating revenue around with we've positive couple operating expenses

core invest continue platforms, and One and is relative continuing our evolve around see continuing both to competencies digital and to capabilities. and to digital in marketing and some growth -- to technology marketing, technologies

across chunk I along pace that variable Second, terrific is to growing just our so, just growth. of an that seen of a customer costs is at growth comes just there revenue our business. big mentioned, we've some businesses, that variable to as amount related all of is accelerated the and against And there tied

to customers, then to And the for continuing Those acquisition. and company to of not will expense last of in we transaction that for relative and the HCS ways are have key hit themes. grow that, perfect but the the and closing look least, for our the QX just some example is long-term value

Kevin Barker

Okay.

consistent growth will with expect you accelerate the in HCS year-over-year third in what we the and think do forward? or do So go rates it given transaction to you marine then the persist, quarter saw

Jenn LaClair

within to $XX will flat which in pre-tax relative I and of seasonality in HCS Yeah, our half we're expenses million And tech, of expecting $XX about to to kind guidance of be some have percent close, well down XXXX, marketing impact to QX, kind overall a million we that on mean is efficiency ratio. of QX. for in

Kevin Barker

my taking for question. you Thank Okay.

Jenn LaClair

Kevin. you, Thank

Operator

Thank you.

come Sandler Donat Our from O'Neill. next question will with Chris

Chris Donat

-- and full prior to based wanted Good the year track in Jenn, remarks the -- I morning ask you've to it. the taking on like for with got some about of flush question. to comment bias guidance. the piece you're you meet upside the to just be of that thanks the I part my EPS it some the that made seems because want on sort out your other of prepared -- guidance three quarters, should there

million, Services -- to one-time Health around But the in $XX in closing are there XXXX? commentary into or is that there your with the that acquisition acquisition nature related million persist the $XX the is will that losses to Credit transaction

Jenn LaClair

good so Chris. Yeah morning A couple of things.

in little some So first can perspective, lease from and lumpy an be will we're on little vehicle some impacts have come pressure mentioned expecting down some is so linear of we it’s We of all there. gains impact on but sequential seasonality always of a QX, do quarterly and prices the NII NII, just still the impacts used to bit mean, a to path. I the quarter, in bit, not expense year-over-year, a bit up be I of terms NII. there

And seasonality than no quarter the we've then on in any history of company. in had there, the of provision, we different tend fourth have to kind

on just mind, putting there's the is overall So in seasonal which element track guidance. keep our us back EPS with

balances grow to in provision operating And roll transaction. that portfolio, we portfolio, million part obviously acquire are some nature. that forward not would They it. expenses the about as We And build that in transaction that into that expense continue QX, is then we as $XXX to got around got We've HCS, we've XXXX. the then expense in of we closed and some relative in first quarter. expect are will we then one-time there second,

spite drivers. ROE accretive do really that one big more that, with again keep have NII to I guidance grown opportunity expectations. with point want to rate drive with to over taking original ROA for line interest year, sticking do here, are Those of long-term we this and that's that's want are we I volatile fact spite two and incredibly time. But an -- But assets in and the of the emphasize our pleased in really view, the earnings in a environment, and

We're longer-term hitting as NIM guiding we've XXXX. We're head been to view. growth expansion, have continued a and into towards, flattening NII that number taking that incredibly and positioned now well we

Chris Donat

third at question Okay. premium the in the quarter And each they and to be trend written premiums, then the if looking the I had written I'm you correctly, insurance year. business too about that higher of -- one have tend

If component premium explain going you of understand that going it, just there? stronger, on on what's earned to is just what's want seasonally I why written understand but there,

Jenn LaClair

as Chris, really will Yeah, growth you I at mean, there say, is some just to key earned there. any both lumpiness look there I related costs. premiums, and of driver reinsurance isn't written

that, expenses reinsurance weather written reinsurance than trajectory costs do and and some premium growth when have we linear higher you quarters. the pretty see But the been a mirror with we losses, other weather a so high perspective. earned typically in so from it's an And

Chris Donat

much. very Thanks Okay.

Jenn LaClair

Chris. you, Thank

Operator

you. Thank

Wasserstrom Our next Eric with question comes UBS. from

Eric Wasserstrom

maybe think correct? guys capital just the very benefit preface to main Jenn, Thanks is a my that? think did to into CETX much. that period, I'm through what year, lock I trying And in was of on the the you next securitization question of but CETX bit I the saw is, little

Jenn LaClair

There usual. answer business to short is activity, we some any impacts as that. securitization did just So have related yes, is not CETX big

Eric Wasserstrom

Okay.

Jenn LaClair

CETX day one up continuing are to fourth on quarter, that's basis position terms thoughtful, and being and just we grow are well points the mean question, in I of absorb XX to to about us we your And just CECL. very from CETX really impact since

the XX% XXXX, very capital So we're to impact hitting again, absorb positioned of in well that.

to in continue opportunities $XXX all capital. we to the above of strategic transaction in so and here that, the then event. of million that'll that, that well we positioning in for closed of dividends. deploy done In a HCS year-to-date form to QX, look distributing repurchases ourselves and capital, QX spite are very addition We've to beyond have be in over And that,

on to that organically sure we thoughtful growth and position to our continue priorities. just capital, strategic balance focused but to ourselves, terms RWA sheet to CECL, of we'll very not also so stay in make be accrete absorb management can And only

Eric Wasserstrom

Great.

and I if day the just maybe bps phase is arithmetic -- with pro quick in that. ballpark about of a that rata. I guess impact can correct? so, And quarter on My -- Is phased that just then one on CECL the follow well XX up

Jenn LaClair

XX% to take it XX% that given any overall year. of kind of and Take of you range quarter given then a in of that think mean, that any I XX% year. Yeah, about in in kind

impact, the years. of effect, over So kind the next tax take four that of reserve XX%

Eric Wasserstrom

Got it.

typically XX XX basically And and bit impact that then HCS, about just so so like basis little to is dynamics, accretion from is which sounds other right? then it the points the a of

Jenn LaClair

done. Well Yes.

Eric Wasserstrom

Okay. All very right, appreciate I thanks much. it.

Jenn LaClair

you, Thank Eric.

Operator

you. Thank

Our next Oppenheimer. Gabriele from with comes Dominick question

Dominick Gabriele

the when are so thanks mix look interest about on change quarter, think funding a release the total some Hi, today, and if costs and rate talk that funding in path my forward could quarter-over-quarter, we you deposit trajectory much we and your questions. from accelerate the downward Thanks. When here? the where deposit for going we quarter-over-quarter about you at costs can saw and this targets taking have, nice implieds

Jenn LaClair

XX%. mentioned Yes, want funding I as growth, target it's we balance well formula. on earlier, customer mean I XX% our not growth, But a balance level feel focus we're to -- we do positioned. well, We to perfect We're of strategic approaching

to to down higher best that ups, to continues my think I to the and down on opportunities ease, could that's the the -- morning about it. the the continue this will be that on beta than comments in mentioned probably take think basis way downs and I points XX see beta as Fed is already we OSA rates

Dominick Gabriele

Thanks in on about time, where great, lease -- we the there and particular? we on really Okay, the yields about you you this be that auto little the ramp much. don't And on thanks. If and some so bit about betas the in then more when side. what's a you talk talking think think you about over Can What's, may And the mention yield did mind, uplift yields that. saw actually quarter. there, nice going

Jenn LaClair

swap. back to on with to sure. increase in increase go that passed start then three you in on benchmark we year tightening that's X% we the if two lease. to But the we above mark. over benchmark when as we've Yes, passed rate, of can And started originate the really go underlying rate, that auto, yeah, the retail and cycle, XXX% to I'll the Maybe

in the mark. on mean, beta you underlying that that the to market is year we points because and average has just three pricing down if two on in basis I to the Now look benchmark continue X% zero. year-to-date, above XXX put been

rate number has there to period. demand, One a high Now the well as is while fact years there. purchases, is average a the is are below up of as car from sustained time well couple consumer -- compared dynamics we a healthy that of ago, the historic

on debt rate absorbed. to continues the so, income and be overall the car payment And relative interest level income to

point. this of So we're at sensitivity lot from overall price the a not seeing consumer

Now, go we mind Fed this as forward see fed and seeing is coming could funds some and that just top we're funds down, not potentially pressure at of we see on we point. rates. But

And used sustained then, lease gains. a by been lumpiness That's we to quarter, vehicle can quarter. We very this there, have relative some prices. to strong especially gain lease, related had strong really lease

point. I've down very some But because gains, this at expecting used value come car continues quarter, vehicle of times as we overall sustained by to lease nice performance, be which to a used really pickup -- are We mentioned strong. had several

Dominick Gabriele

it. I different you sales if of we I more year-over-year is Is really Thanks slowed a then a the be the given business, recently? And may just growth much, loan may place, or or strategy saw there, kind there bit. that one-off? the the one today, of spike taking from what mortgage one slow the do a growth increased market on see was in And this why of more, so mortgage application mortgage appreciate

Jenn LaClair

maybe DTC Yes, versus no, separate I'll sure, it bulk.

puts hit DTC $XXX# originations, side, us, billion originate in is record the mark well for million of quarter that we up lot mentioned, we've growth, path to ourselves. and the absolutely a which to the set On $X I on and we us for a see

grow to originations, peaked really opportunity has So offering have, refi on volume the especially bullish on here. the DTC we product the side, to continue as

with as partnership, on and get so DTC the continue returns that business And we we can great think better.com well. we'll really to grow

absolutely you're bulk right. side, the On

in we a just little have We have loan a and balances book, prepayments have strategy seen have bit way thoughtful and about early just increase, which a that in down and really as brought the of we did there, grow we the shift been amortization we sale. expense

was part the because exiting drop. LIBOR just transition, in of of that was the that of yield positioning money, around were Part just that some rate lower the of but portfolios and the

be making capital thoughtful get book. we'll as the continue So we to the to bulk, allocate we sure to are accretive that just incredibly yields right

Dominick Gabriele

Thanks so much my for taking questions.

Jenn LaClair

you. Thank

Operator

our time will question. And ladies do and have you, question we last with for JPMorgan. gentlemen from I'm Rick come Thank Shane last showing one

Rick Shane

I Jenn, clarification. for up little like had I but it, year-over-year. bit going on -- taking Hey thought guys, I'm touch this actually thanks morning. nicely bit a were lease yields question of were a and I'd a The to question, little you lease my

actually were But gains if you at the from flat. sales, look they vehicle

change So this the depreciation a lease shift new mix business, in if the is I'm curves vintages, there a are in power more terms curious you or is to pricing actually was the of there that guys using?

Jenn LaClair

kind the short the we X% of all were quarter, couple up terms see of been of towards answer about line We trending that been to and this ex-gains no. mean, origination and flow. we've right I hundred yield did guiding But kind in in of low strong with think of that. is so I we've Yeah, of flow million

portfolio. the But, lease trends, gains. And the terms in then real that no Rick, to trajectory our anything just overall around and above X% gains of related is the

Rick Shane

you thank much. great, so Okay,

Jenn LaClair

Rick. you, Thank

Operator

Mr. today's Ladies Eller for back closing to question-and-answer I and Daniel gentlemen, any now thank the you would over in remarks. participating call session. for like to hand

Daniel Eller

you operator. Thanks morning. feel our reach you joining and Investor to additional that, Relations, we to call questions, this please is I'll free for say out if have All thank

Operator

Ladies call. and participating. gentlemen, for you this Thank concludes today's conference

now may You disconnect.

Ally Financial (ALLY) 16 Oct 192019 Q3 Earnings call transcript