ALLY - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ally Financial Q3 2021 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. If anyone should require Operator assistance during the program, please press star then zero. I would now like to turn the call to Mr. Investor of Head Eller, Relations. Daniel

You may begin.

Daniel Eller

results and XXXX Relations of earnings you and presentation CFO review we’ll ally.com. welcome that today’s our I’ll CEO found everyone quarter third our on Ally’s will LaClair can Financial’s reference Ally Jen taking call. the section Brown, questions. note to Jeff Thank before call This be on our morning Investor the website,

X. GAAP Slide to or Slide and substitute governing language reconciliations supplemental or JB. turn appendix. today’s can and Definitions for X, factor found and to be not I’ll in risk the on These while a on are metrics pertaining and and can statements measures Forward-looking With measures. over performance capital U.S. non-GAAP, call are be GAAP core call that, operating to the found our results

Jeffrey Brown

morning be leading you posted all Thank We disciplined environment. to continued another you our and healthy culture. Momentum strong consumer across execution quarter macro reflects and our We of as strong everyone. Daniel. our results as do-it-right benefit from by well call businesses today. underpinned a businesses Good appreciate positioned our joining

quarter. family. On evident for taken X, important this are announce the which No. to products. company a all Square leadership was of acquisition credit card pleased been stakeholders, product team following bring Slide of our purpose-driven digital-first have we time provider We’re in Fair as set Ally we and continued actions This the term some of to further excited and suite the our driving into a enhances Financial, consumer during is we quite several long value great for

actions our national eliminate Cities overdraft customer industry-leading Fund Empowerment status recognition bank fees. our approach, front, in the Financial for our customer-first of On to on citing account the certified

rolled underserved looking also obtain now to product, access populations a expanding a out refi We to mortgage.

all employees $XX This XX% an program, an important receive to program our promoting will an in third aligns we me Ally announced environment hour teammate our and be our minimum company. every mission. grant stock and per teammates, shared and Ally our it wage the is through eligible across of increased to advancing For own annual to mentality ownership success

participated. Additionally, in from forward. were group our XX in internship Inc., we efforts, our value I by we’ve recognizing named and earlier term the who Moguls our offers we student-led I of our pride men community this to Among XX nurtured long annual year awarded and Work women stakeholders Top inclusive many Place is Making to moving several HBCUs a scholarships exceeded featuring accomplishments have in driving the representation to years. and continue have Diversity The competition, the inspiring all only over ability of in young environment for confidence held the

of The Ally Let’s by Ally’s represented insurance diversified third XX.X%, remains EPS highlights. levels to reflect quarter of where powered positioned No. billion all the auto, third $X.XX, of drivers record-setting $X.X Adjusted performance turn Slide quarter credit and nearly ROTC revenues solid by of X, platforms. revenues and I’ll and backdrop touch measures and well core on fundamental trends. dominant and strong credit Bank

outlook. opportunities several platform expanding adaptability of dealers. XX applications and The $XX.X Ally’s strength third years decisioned is Our ability in X.X% comprehensive represented a in years quarter past in us highest of in originations at our impressive industry-leading consecutive billion seen auto, agile clearly and capture in the and million of and across really XX the product our yield. to offerings years Within our customer-centric businesses market X.X long-term time, provide results consumer real evident our

eventual positioned and near Credit ecosystem auto ability and on our as enhance in NCOs, quarter distribution basis shifts third reserved and retail capabilities of the strong of well strength tools to savings, mitigate deliver in true relationships broader resulting healthy record the and dealer of industry technology, collections, financially Impacts teammates helped and resulted dealers seasoned semiconductor the and business and sheets, solid for trends. We’ve the and winning with advanced performance losses. balance lowest remain term. finance scaled and We our OEM remain our and foster of together. new gradual data, sense to wind-down and long record. of inflationary auto assistance points shortages comes innovative production Overall, job great shared approach maintained constraints pride normalization that for remains XX enhanced partners our dynamics wage our These increasing self-service excess of in use Ally ongoing the a to customers, inventories. Our prospects. evolves consumers back of with for and well a underwriting programs with but lows disciplined

and industry minimal. approaching insurance Ida our the expect plan claims business plan are business, premiums of remain will low ongoing portfolio part insurance mark. demand floor through million year, million and written provides Hurricane customers floor reflected we X latter the now Given insurance used which support structural $XXX for The investment values. $X.X within lower next sales consumer levels; robust, our were Ally Within levels demand of vehicle generated remains and solid billion however, revenues,

XXth to reinforcing platform. expansion and balances $XXX Ally in scalable, to customers representing billion, the trends year-to-date for of expanded deposit $X.X continued, Retail the nimble nature consecutive of Bank, billion. growth quarter grew growth our Turning

sourced increase to market assets with and year-over-year of the to the originations surpassed stable continue that bank Home at quarter $XXX nearly customer relationships which the Lending secure award-winning customer We across out Ally the result finance platforms. year build we Corporate billion generated tripled XX% verticals more through self-directed driven capabilities growth channel. with HFI another period. year compared double for integrated, reinforces $X.X home as million. $XX.X quarter $XX million to our customer our Ally $X.X increasingly solid the retail a our billion, ended originations, account first managed total of Invest growing each from platform half growth improvement engaged than billion healthcare and posted of a in by balance Ally combined as base. we activity level balances prior differentiated and and deliver Performance deepen with businesses combines prior the needs time. billion sheet leading the deeply meet to ability the our exceeding exposure of digital and

this solid by of leveraging and remains Turning in each No. balance strength upper sheet on our be our performance page. shown PP&R the again of all years Slide and annual the opportunities In generated across right, to X, the expansion billion growth will measures the quarter ahead $X businesses. surpassed of the across

all-time right On company to build intrinsic and high value $XX.XX. of a tangible publicly share traded reached of per book the years value. bottom an Since clear seven financial ago, we’ve becoming the demonstrated ability page, a

grown mid-teens earning expanded single we’ve XX%, book moving from ROTCE. over over revenues increased over assets value delivered return digits and low Specifically, XX%, XX%, to transformed a profile

returns, key our has announcing point-of-sale differentiated since mortgage, objective value Adding large capabilities experiences, to investing, This enhanced drive this long acquisition management and addressable are and our introducing expanding transaction centered experience of aligns to of the to tech management execution expand and us card wallets are and and for Launched enhancement. grow deep customer-centric risk long-term Through within accretive with underserved diligence priorities in marketing, through unique XXXX forward management. we’re strategy yet and relentless products solid compelling around has credit adding By familiarity in that fully team a with our team added XXXX, market we’ve employee culture risk-adjusted credit capabilities term are The nimble, focus, positioning team a another gap. platforms. risk opportunity successfully attractive Square several differentiated card management No. to enhances in via today and us, digitally Slide X, capabilities, we’re customer an markets. the customers. our capabilities, important and growth. delivering modern even Turning our their Fair more executed to our decades this we continue confident returns. and deliver product driving digitally-based in consumer to market, an an been collective credit ability ongoing and solid efforts, reach to capability a underwriting address underserved and values, opportunity to has product positioning presence and strong segment card results The in

third an quarter While what underserved the expanded other the walk the excited market. two together the family will years offerings pass has through in on card for welcome past over steady Ally experienced it industry credit and we With few I’ll a in the pause I and our ahead. Ollo-branded years, months team transaction Square’s and acquisition customer to overall to the in details do Square Fair to due to Jen growth that, Fair a results. I’m have

Jennifer LaClair

Thank you JB, and good morning everyone.

of XXXX excited are delivery highlights engage X, digital through digitally in-market rated Ally, surprise XX% engagement and One the and early, sophisticated, a products the Fair NPS payment we in enhances of team’s of runway the as announce accelerate digital trends offerings, efficient marketing Growth consumer analytics straightforward robust. to builds technology, compelling be the focusing This trends, can spend. and XX% growth platforms, highly heard, Account proprietary and since Square across grow of of teams of complementary are total and month. to exit four percent of past at appendix, familiar position platform and The and our the Fair been no estimated value consistently of a loan hundred existing resonates consumer team’s risk brand their our Square of bank as and Ally you Slide impacts, and risk-adjusted differentiated the to aligned promise and profitability ROA for be the on incorporates fees. concept As rooted transaction defined opportunity representing the XX% each On and success the proposition just and customers earnings acquisition completed the portfolio. and underserved provided mid-XXs. left shown with bottom nature experience. points less accretive outpacing after-tax the to with the revenues acquisition we momentum XXX DNA Square The seamless of products mid-teens several above and highlight integrated snapshot credit fit large we balance of scalable organically costs launch growth largest Fair management extensive to These and in and satisfaction rapidly company. A strategy. brand Standalone and Once to and by a ongoing this powered the industry have of in returns demonstrating applications approach. customer given CECL XXX margins, strategies Square and are product full The Bank year XXXX, attractive the The natural years. are deeply XXXX J-curve. our while a presents over expect consumers found market. around CAGRs in XX% offerings they our have economics. basis Ally and rates data digitally platform leading approach customer, management in operating generating scores X% the late elevated as transaction as and U.S. are lower Fair closed, the adding to by our we to trends

accelerated addition replacing across opportunities deposit the by Ally, funding we wholesale synergies In will realize funding. to growth

allocation and profiles, that growth aligned our and criteria, meets differentiated We’re to highly of and all for adding enhance capital including engine stakeholders. all and ability delivering through the long-term our products risk-return value accretive of customer a services customer-centric value aligned,

quarter excluding earnings pre-tax Slide the consecutive results. quarter, highest turn level We X third for year-over-year. growing generated billion quarter. OID, Let’s record strong of billion the XX% of core for reached to financing on revenue, consecutive $X.X third review to Net $X the second our

higher and trajectory the by auto of as permanently to be benefits in reduce accretive NIM alternatives. stable reflecting values, NII enhanced costs dependence growth asset Our optimized powered trends car deposit our core earning expansion funding cost retail further continues and yields, by used elevated

uniquely Ally us rate a $XXX the from and flat positions SmartAuction, Our Adjusted investment reflecting another other and curve. of quarter gains of was balance insurance. diversified million, solid to Invest, Home, sheet headwinds overcome revenue revenues

the reflected securities. expense we respectively. capabilities. remains seasonally, and million billion $X $X.XX well were well our remaining associated across in over just of essentialism enterprise expense on the of Non-interest growth $XX continued indicated last strong. investments overall increased of with As levels as expense business as credit GAAP normalized adjusted of quarter, focus below repositioned trust-preferred as $X.XX EPS $XX and a and million Provision performance exceptionally OID for the quarter new retirement

our credit and values businesses. we’ve we and used for in in car previously improvements to permanent continue and across and embedded the As leading XXXX, structural trends highlight our XXXX growing sheet indicated, trends outlook balance normalized

while excluding yield auto of car quarter-over-quarter, Moving track origination by persistent and the XXX and our expect demand activity rise These expanded be above to balances, to basis over balances on levels expansion, Slide ongoing reflected basis reduced full to aided $XXX.X or X.XX% we and by values XX, assets XX% dynamics fourth above retail or net points XX% at liquidity points, stemming OID Earning of year-over-year. interest growing asset X%, auto and redeployment liquidity. quarter constraints. and margin quarter robust XX prepayment yields consumer over X.XX% car retail plan and year Ally Lending of earning yields of Ally from average elevated offset balances target year-over-year. excess from ongoing remains used stable floor of remains increased used lease Home headwinds XXXX and values, billion supply

our industry-leading strength both differentiated liabilities, to to ninth reflects and years well for interest the the and we suite financial over the grow asset over improved linked decade balance above Stable, we’ve revenue over XX rate positioned sticky focus the expect the elasticity double net and well several in funding, We this rate at Ally lower environments funds across XXXX confident digitally-based We loyalty of dealers, sustain in variety on our which cost and years. of the price several than ability sheet margins Turning X% of businesses remain higher expect through environments, our given products continue positioning. quarter a net consecutive basis a customers points, and Disciplined as of past past now growing all built engagement of and clients, overall Bank and deposits next our XX% decline. represent result more to remain financing growth services products. level. generated for improved

XX.X% nearly capital. points remained Turning XXX above billion to of equivalent XX, target, excess CET-X $X.X internal basis Slide to of our

QX Capital we we’ve on initiated buyback frame. the consistent We over and recently over our to our in dividend this XX% demonstrate buybacks announced disciplined, Shares $X and dividend execute approach XXXX on share. several program our $X.XX actions dynamic in are full priorities. the billion XXXX, deployment and years of track past outstanding occasions time declined have increased since per six same

During reflected prior commercial each upgraded XX, payment improved exhibit excess loss the solid strong default portfolios us the quarter, and year bringing points net capital. given performance utilize to one of basis major asset XXXX half very Moody’s than the Ally, of Consumer we’ll acquisition, around and Slide auto to levels. Fair historically our remained and less of performance. testament the agencies, of less quarter to quality continue strong. points, Consolidated to at and rates. around company. the Retail than another charge-offs XX% investment On XX XX were rating Square trends basis XX strength fortitude closing grade our of Upon

XX We XX in X.X% below expect to full to the X.X% and year NCOs the range reserve basis we against. range, point XXXX underwrite retail to well

and quarter strength As quarter In of an to macroeconomic X.XX% retail consumer we’ve trends higher could continued overall, and across seasonally be levels encouraging the occasions, several X XX, financial back of sale, auto the On XXXX, early portfolios. normalized consolidated over by leading contemplates point extended on generally basis late but given a right, delinquency steady trends the indicator remained auto, points reflected coverage moved coverage outlook noted though moved into bottom year-end this our solid among migration Retail improved consumer. as lower mortgage health heading measures. growth by X.XX% and Slide of in XXXX. of stage

variety XX% We including positioned Slide balances remains scenarios. to $XXX XX, $X.X of who may by reflecting with balance removing of desire our relationships for grow stable no over total propensity and leading limited at quarter, XX,XXX ended or continue the here, and not their in offset vintage. of broad to with younger higher well retention credit remain billion actively consistently accounts annual each trends, Underlying within shown in XX% growth from We of billion, to reserves multi-product over a growing excluding customers. activity downside and customers but demonstrate observed a practice continued for confident quarter, Customer timeframe, money industry us. monitor continue of the six-month deposits a we range keep forward. we expect growth environments, On remain consecutive that are portrayal variables retail their net digitally. adjustment to a impacted metric, our moving at retention and more is added which multi-relationship economic This which QX accurate XXth active this a generations, believe reported our engaged, customers growth as engage impact our we with performance

Turning Slide Invest at grew our through the and acquired decade, convenient, customers relationships straightforward satisfaction CAGR a platforms. and to Ally sale digital steady Ally and offering We’ve Ally past and and market. a XX, balances rapidly growth remains to point XX% in loyalty our all bank offering. across customers expanding significant volume while existing we Home the from a of expanding continue depositors over cultivating of for expansion spot bright activity Lending’s derive account

in as for well formula add the credit ahead. Our months us card we success positions

risk-adjusted right bottom and highlight NCO solid values, trends of trends, solid the on by growth consumer performance. XX, the optimization strong and continued years Moving million we’ve credit and pre-tax SmartAuction the to performance. was ongoing income reflected used many ClearPass, and by yields in auto over Slide and net revenue expansion in driven from portfolio segment strength driven the shown platform market strong of origination built $XXX financing portfolio Retail

retail XX, and adapt Slide environment. and of the lending, at constantly needs, supply to consumer upper more to low by driven commercial to In as in services products the expanded $XX.X strong inventories upper and SmartAuction portfolio industry Ally as new growth. ability loans balances our lending, a assets originate an relationships. differentiator in evidenced and multi-year across commercial and commercial auto to our lease XX,XXX surpassed dealers deepen consumer relationships of growth ended In Turning or purchased by billion our demand competitive we one customer right, billion, ending and important $XX.X who we multi-decade dealer consumer for Average dealer we source left, a chain constraints. set driven and

We continue while profitability to demand in to available part we’ve approach. due lower and costs consistent pricing a supply. quarter and since see highest strong $XX.X evidenced billion XXXX broad-based health for among Auto originations of dealers, our third strong underwriting represented maintained inventory in carry

levels growth We future the products, bottom XX, core segment year mindful dealer prevailing Slide of low $XX decreased our costs. our staying through quarter providing income on investment to increased focused repair the $XXX over network plan for corresponding left, and year. diversified volumes. We and large that of floor consolidated revenues maintenance $X.X and leveraging insurance Turning reflected remain pre-tax returns. of pricing on over premiums actively impacts on the assess written million In our segment Total enhance continued unit vehicle portfolio billion quarter inflationary holistic across million offerings. and

XXXX highest $X.X of billion, with the million solid record, billion Slide strong and and XX trends. and on included to position expectations, coverage $XX as growth will balances revenue our our Slide and exceed and credit in million of and trends. ongoing offset and partly HFI, On on credit unfunded expectation schedule to trends investment ended We’ve finance syndication outlook $XX XXXX levels solid asset XX%, affirmed experience we Pre-tax acquisition Mortgage expansion, of remains by Portfolio at our in shift also Ally we’ve reflecting for the surpass continues growth, sale for income Slide XXXX volume this direct-to-consumer Home layered reflects of persistently to PP&R with are of XX, quarter. HFS ROTCE expansion Fair billion billion income, generate this financial credit of direct-to-consumer compelling Turning return asset line reflected points. the commitments XX, corporate normalizing year, margins, ahead core to us Square. and $X.X allowing income prepayment strong in volume reserve $X XX. growth. again on excluding $X.X by loan reduce basis associated and strong a in gain to releases from expect us digitally-based performance. to performance HFI details originations resonate. elevated

upside this As year. uniquely in in operating environment strong I the opportunities noted we’ve earlier, captured we’re

driven X% among other Importantly, and offering. significant mid-teens and return the mid NIM our will by in and progress. reflected objectives established enhanced and in results a our the provides view fueled revenue broadened revenue be sustained of to profile clear These generated our expansion outlook broader consumer upper PP&R diversified

a but we As assume reminder, remain activity in opportunistic will modest ahead. gain investment the years

balanced and credit, used pricing. Our environment incorporates prices, assumptions, trends outlook including car across competitive and normalized operating deposit

for all We’re our JB. continue term and to back confident near to ability stakeholders, with turn and I’ll that, benefits our in it of long driving

Jeffrey Brown

Thank No. a comments on you XX. few Jen. close I’ll with Slide

and growth success company results have services. remain customer and several new, can head and and on us, of our a the years. Q&A. now clear exciting priorities to of execute We’ve front well Our foundations outlook needs compelling values Daniel, continued through you the we clear over meeting With cause growth With disciplined execution focus and upon prioritization will remains served a a the continue of we built for us of chapter same with products that back purpose achievable. that, differentiated to and resolute, in into strong, and

Daniel Eller

Thanks JB.

question to to I’ll it Q&A. begin the yourselves As one and to Operator, follow-up. the I’ll participants you to over turn ask we into one head limit Q&A,

Operator

comes Research. Wolfe question with first Our Carcache from Bill

Bill Carcache

to with Square Jen. in deal. my the you Appreciate more certainly had platform guys your on--all announced. Does we to build comments point of business, and to certainly ROE inorganic credit business Thanks, the card time? you’d quite but points other terms or the of XXX impressive, through of such good XXX that the is it add basis given Fair up starting high business, a wanted would that follow In on the a look to smaller questions, taking outlook, over seems opportunities should just nature you that seem It’s organically like potential business. grow, it this continues longer I that there you digital out extent you to and to to hear JB detail I’d you term deal could around as card prior the greater guys it be--if could there to be love your think enough a accretion, thoughts to than for morning. some continue grow provide that on provided the that.

Jennifer LaClair

morning Good want and sure. JB may I’ll add. in Bill. Yes, to jump

future. the growth you be Ally your have the of on see growth longer that quickly in not in Ally historic Bill near see accretion, gives to we’re in been question really as growth your continued that what can kind ROTCE very into across Square the grow can as J-curve relative is four would to and the you and to these whole have we out and XX%-plus math them is CECL, the so I’ll note accretion we we as more confidence with some those levels. so capital answer access your also high products active walls term $X the this EPS they results, fuel to them they scale customers the on that that we for the and them so around at but products, have on increase is meaningful we built, can. could just just loan here, want the platform, within the question Then frankly, broader poised that trade-off, with their growth how the term, painful both takes to included Bringing XX% synergies see and business they’ve their already million-plus of short liquidity accelerate through they’ve with expecting is certainly and as four the accretion time, yes, grow and over to well continue to platform to established ecosystem growth. they’ve Fair quite successful First question absolutely over give and account

We’re really in toggle the also of confident just basis on the we XXX into couple I don’t CECL, want if years, to term takes up the ROTCE next but in long that math on add the to and focus XXX growth here. very down. could points of anything? you which JB, to consideration But know we want

Jeffrey Brown

to experts, their Jen, I other we’ve you’ve area perfectly. an really, Bill, framed management no has really the These also obviously sits on and leadership the strong can this out what pleased opportunities a business a within we about this see mean and up scale really of for us business so just card, interest card But going sides about team, it much I broader There’s of really to state excited the say, forward. forward. card examined foundations think This good that and lot surprise, team. been that think really thought lot. think own. so a I up we’re and expertise said, as the is I’d grew industry a are thing Jen are in about really wanted do but something going of today, all lot

Bill Carcache

fair significant different to a banks, continue a on follow how relative NIM, it’s still and thank by here, that around traditional I the That that, If room on a X% upper of want migrate to bias you lower deposit and to towards thank upper of for then end thoughts your but could said, need more understanding that cost of you If there’s extension, a range? premium up funding, some know be? to but interest-bearing very continue there mid give premium that say from helpful, to Jen, healthy to to could separately makes you I Is with you. is to offer does question that deposits the lot sense it you. some

Jennifer LaClair

sure. Yes,

will just of about cost the to lower a funding have fuel an there X%, OSA terms that - of the lot you’ll guiding down, mix still and that been of so side, overall that rationalize you’re is basis talked bring that sector you’re overall outside CDs continue so see largely I as the funding but industry NIM, then costs expansion. absolutely to to points, there rolling and, of still opportunities we’ve deposits, we upside right had there, quarters X%, towards and funds long cost, and into there to could we as On had has the bias NIM A so and in into for kind is and there. a nine additional runway at to Then pointing consecutive be and of case and XX head is XXXX have continue the high we’ve think with NIM and out, Square, I of the absolutely to here, Ally below we runway Bill, as down CDs gives the think of X% really I re-pricing. it floored us about an The Fair upward we some long beyond. tailwind acquisition ’XX X.X% related

Bill Carcache

questions. helpful. really Thank That’s you for my taking

Jennifer LaClair

Bill. Thank you

Jeffrey Brown

Thanks Bill.

Operator

from with comes Our next Sanjay question KBW. Sakhrani

Sanjay Sakhrani

was talk talked bring sort are first but that cross-selling down mentioned about to question about to--my go lending how initiatives. band expect more customers, finance range it you potentially business? other Jen, wondering on Thanks. could also tie and the you your business, of ROA Square. that, today FICO talk maybe and end the that do you the Hey some to is up-market? could if you just up into Maybe just that your Fair on would the slide, I that envision you consumer I of about wanted to you focus just guys. that guys markets of in following

Jennifer LaClair

the question, thanks for Sanjay. Sure,

largely and middle on do aggressively above think with a focused one grow, been spectrum that they’ve there full First the customer to seen they them their they’ve and card to data-driven allow their that, markets, more have and their customer, that market focus number digital that they largely that FICO on average about then a full We think is segment able capabilities level, what target opportunities in go do through the spectrum. and so with keep they’ve they the is to we so to income on why Priority to and been capabilities. underserved have XXX environment. believe that’s underwriting a on capabilities difficult a unique broad-based platforms, and a class $XX,XXX about have grow

As would growth I be that just modeled about upside contemplated into ROA, but we’ve that we’ve opportunity. mentioned, we as haven’t that you this think Then impacts some scenarios the provided overall that X% there we’re a be little more accretive it Ally there go about and running very think should ROA, on be pressure today. that if you to we could where if but did up-market, bit morning,

lot only do opportunities of we there we think of broader segment of As on well, as about the cross-sell the into product certainly the there we our it’s products is card opportunity card, not cross-sell is we’re so some think this really but opportunities here. more in bank, A growth, other business. auto that within into generate as to Ally and about card the ecosystem but cross-sell, thinking bringing

think we’ve projections been in pretty excited. provided, the we’re and we’ve really I modest

Sanjay Sakhrani

its turning supply more to there. just so changed provide setting Stellantis set, you great. establishing auto origination Obviously be could could you if issues, I outlook XXXX you competition you on if guidance, that’d might speak in anything’s know don’t Maybe just chain but be the up some Maybe be could your the and a broadly just have follow-up, business. you’ve might got the so Then some standpoint. about an talk own from captive, Okay. how

Jennifer LaClair

X%, continues Yes, flow in we’ve highlighted sure. application third quarter, our yields pricing XX full market you performing. and continuing think in to year at X.XX% our that how at so I with auto is origination is market to see with a highest in the just to see years, can highest position we our seen flow performance perform, perform for strong and strong remarks really the Sanjay, in continuing prepared

still XXXX, detail to expecting so billion, really originations, not XXth we’re could outflow, based $XX increase in but year into into that robust but $XX also robust we’re so and see market we’ll that of our consecutive quite as the maybe well of dealers, in stopping provide on look in as continued any be we application reduction. likely overall, we auto As modest lot and there billion, about But really to a as and exceptionally some with flow to January, our more signs perform we feeling see strengthen trends, continues that. to growing that continues position good market well get don’t

Jeffrey Brown

but Sanjay, Long be on our maybe there the implications? realistically dealers. don’t think any the only is focus Perhaps, did, thing I’d add, presents term, of care for change taking could obviously soon. I anytime Stellantis doing obviously that what us they

or from what We about they don’t so of changes of soon. have incredibly in did relationships, did, rationale terms I strong think we’re originations anything the they really it see relationships anytime dealer but I why what thinking

Sanjay Sakhrani

you. Thank

Jeffrey Brown

You got it, you. thank

Operator

comes Autonomous from Our Research. next with Wildhack Rob question

Rob Wildhack

everyone. the Square. and benefit of does you X% being on in One of that kind cost The in Fair of morning is part highlighted funds that into the from run rate considered account Good ROA what slides, Ally, credit more environment take number?

Jennifer LaClair

synergies does funds Fair Yes, of lot so synergies doesn’t revenue portfolio, lower bring of a some is very X% the we that as into and a from it that a growth a good think consideration we and we there. reasonable morning Square overall include see just is into Rob. It a We grow take there cost as again number, perspective. Ally,

Rob Wildhack

consider underlying we just Should Okay. credit as normalized environment the a then? assumption,

Jennifer LaClair

Yes.

players X% expect and have On normalize, with to We to CECL the the in that a today would expect been the think simply X% math guides would transaction I we’ve to that here. provided, they from kind environment, where similar the we over industry. range Rob, the all include into credit other are in of they normalize But do that outperformance. outperforming, we time, highlights the to

Rob Wildhack

decline with do on plan your that through Got part think line from it. quarter decline Then was in you floor business, lowers XXXX, when meaningful a here, of the [indiscernible]? this the say you or we’re is the later and expectations,

Jennifer LaClair

think floor a we’ve the and it’s time year-over-year more, of we billion, under so chips, all now the it’s bit plan’s a every plateaued, we That’s $X but on think decline due chain demand could ’XX, reflective early also ’XX to levels think dynamics a the expect be some inventory also I when late normalize, and is say strong is chip lower. driving of out. Rob, I that to down sorted complexities the I about so constraints basis. around supply XX% consumer, and we of very will would

continue big strong I we question is how ’XX. demand be think will and into ’XX the as

reiterate, upside we any credit extent vehicles that values guide ’XX. our Just so at used of is have hedging and provided in ’XX you built stays we’ve as if and guide, the natural floor lower, LGD look have the consumer to upside that the plan stronger, Rob, to that we in in there not that to anything stays

Jeffrey Brown

add, names, a to And certainly what hearing coming new the now, four Rob, to dealers they’re anytime soon. going that’s growing on maybe to months the only a this to point, of so continued out right the lot cars five from we’re pre-sold touch Jen’s just inventories on lot of in, pressure big keep

Rob Wildhack

That’s thank helpful, very you.

Jennifer LaClair

Thank you Rob.

Operator

with Graseck Stanley. Our Betsy Morgan next comes question from

Betsy Graseck

morning. good Hi,

Jeffrey Brown

Morning.

Jennifer LaClair

Betsy. Hey

Betsy Graseck

you’re of capital, a hey, so to hold we’re do is you’re understand quarter, how to of excess you going to about we’re as a into acquisition to continuation the want buy held excess capital back some rest it about and it of growth? we this loan that, at stage. Wanted the want clip, a is quarter auto thinking think rapid--you for retail we card because know, that we generating this Just this going lot some how capital were up of so at think take think every know, or decent your mentioned or--you so about--you point about--I it making. excess at know, do the to this of The rest? interesting you acquisition. the just Really grow dig portfolio Is onto hold you taking a

Jennifer LaClair

about right XX% it’s short and it’s Betsy, of think Yes excess capital, of above. the all I is our the you’re - answer

that’s We’re continue one time. retail will going grow lease, to and balance every to floor single question, over plan our come auto, the sheet, the it’s it’s back to of that organically portfolios really across -

that and capital we’re deploy so grow serve change without to going in of our card as to grow customers distribute business, balance of a our how but still in a above. no Fair It’s Square of and to all we’ll It’s grow amounts have opportunities of continue seen and well. our buybacks distributed a really not guide Ally rushing thinking capital and on we regard significant to ahead we’ll really We’re to and full we’re dividend, Then our that capital hurry. look portfolio that to sheet. really it’s we’ve Lending through business, that ROTCE first you’ve us, and priorities our overall about allocation. We the continuing credit foremost have capital, the great

Betsy Graseck

to ratio question have and reason the or there’s the you know, - capital level, you that guess card is you it? to and question. the I or closes, strategically your the into by suppose question thought growth do target? more would I quarter holding use fund you the ask been excess you hold your every manner, excess can you a optimized it the I growth got capital do excess really, the you dusted, in some fund that earnings, you’ve is lean that of to capital want ask really I get capital do done that that’s I because capital when you’re and with underlying now capital that that generating guess lot aggressively this to acquisition,

Jennifer LaClair

our working great a now. go we it’s plan and through Yes, question, as we’re right that through strategic

right of XX% the so of actually excess earnings of we’re dry here. there’s You’re through is months lot powder - that this a deploying three still acquisition, that

how are about to our the one we only really balance a returns. creative point, a look question. growth and and growth, great in sheet, it’s and We’re so and think growing pushing in innovative unconstrained It’s smartly to growth - opportunities not marketing more marketplace, about at can we about capital and that businesses taking our your Betsy, a think deploying think investments, looking just technology every where the be way different it’s increase of at investments,

take going a next to grow will it’s We just capital. we years, through bit it, through our this XX% and this will time. excess, of mean, the of is through work as I work few we

Betsy Graseck

to more purchase more you just know from you that’s how to refi I going on mortgage skewed you Wondering environment. If as better.com mortgage, impact we could in relationship. get you I that to if could speak have one a heavy migrate think

Jennifer LaClair

the is relationship of this had in highest business. origination our the you Betsy, Yes well, going and that quarter mortgage flow very we saw our history

digital We’re platform and wide a that and across value consumers. resonating that NPS are really finding of strong the variety scores customer

from the refi think for to shift purchase, of opportunities that In terms us. I presents

anything, HFI think at you just now. I of We value have what is ticket the a we if positioned platform, to really think well we’re and into consumer, and as provide. and of high strong right agile because purchases a we’re higher But especially what with HFI seeing very that a end, proposition shift a the of more to see strong shift we seeing market, head that more a purchase we simply is

Betsy Graseck

Got it, thank you.

Jeffrey Brown

Thanks Betsy.

Jennifer LaClair

Thanks Betsy.

Operator

next Our Morgan. with JP question from Shane comes Rick

Rick Shane

are environment when to effort origination for to a soft, talk now little guys as curious Thanks the given financing. way the also new auto you’re the see enhance come morning. in I’m and if to on a is on finance in supply seeing any from at environment Historically right captives by economics up the whack. sales side. competitive equity basically this their really that, where compelling in captives basically economics like you taking are entrants world, bit moment? of cars seeing private an demand I’d subsidize to so out questions and the the about my premium we the of any capture Then follow

Jennifer LaClair

and to want may jump Yes, I’ll in start JB here.

your To actually out the they backlog, cars question that on high point, provide so down six to any your provide no, seeing we’re to is not needed to that XX to on people seeing we’re The JB’s really those is are car Rick, purchasing create come captives, those or needed because is incentives so demand subsidies. to incentives they demand months haven’t short from because answer Just question haven’t rebates that. now, so demand, strong.

last lender segment. terms think I haven’t prime. mean, we’re we quarter seen in that’s that overall predominantly of shifts in the and including it the that there, in kind play I private the number In major boring. comment segment, prime it’s of boring. of any Just we our JB is because made one equity, environment, kind

seeing of have very we outside and a you flow underwriting the hard of risk around high strong to in ability because more so originate to application just need and of that and business sophisticated enter, and profile to servicing model, very the see it’s It’s hasn’t our regional strategic We bank continue of dealers moat really capabilities. or disrupted very is it all space, so been have we are of in the kind we’re dealers profitable Last but strength captives XX,XXX-plus thrive of but private dealers equity. not around and very movement from XX%-plus, Ally in that not only the end least, this are market, percent with the seeing relationships we also strong.

Rick Shane

incentives that can’t financing they pick curious way look at if just are captive retail towards I’m actually selling dealers, question money to pricing dealers more the make their can the I’m down. cars, up dealers when point. some franchise understand curious they a finance money on they can I just steering are economics fully and this as capture of way totally slightly, I if can re-frame way, cars, look--particularly when at they make Jen, that that just economics Hey

Jennifer LaClair

vehicles. and vehicles. in lot No, fact do of Most now that not new because new it’s captive a simply financing to hard right there’s is around

used, so highest which the level around are history generate more we’ve generated, perspective, captive vehicles. that again just leaning income harder as look a and you into from in for used largely actually at If percent new it’s even financing, become the is it’s dealers percent them dollar from to the

Rick Shane

so totally makes Thank you That sense. much.

Jennifer LaClair

Rick. you Thank

Jeffrey Brown

Rick. Thanks

Operator

Our comes next Suisse. Moshe Orenbuch, from Credit question

Jeffrey Brown

be Moshe, on mute, out may you if there. you’re

Daniel Eller

move in back the queue. next Moshe. the Operator, let’s We’ll to come to

Operator

Okay.

Our from Sandler. Kevin with next question comes Piper Barker

Kevin Barker

Square. up thanks follow for questions. just wanted I Fair my to morning, Good taking again on

run basis of expansion XXXX? of in for reconcile return out versus imply the which mentioned the it get XXX would XXXX guidance earnings. of XXX seems, outline well over you also $XXX in and points, ROA, maybe accretive You XXX you to the maybe equity Could to on X% million would over $XX ROE how basis million which rate today million in you points it’s to XXXX, earnings $XX implies, to then run earnings, rate

Jennifer LaClair

Kevin for question. the thanks Yes,

is On there’s our accretive actually simply on the capital deal of ROTCE, to there day accretive. so ROTCE, so denominator putting work, the we’re the effect about immediately we’re because one excess a think XX%

you effect bit the look year we the and for It’s we’ll EPS, start XXXX, denominator takes but difference. longer, CET-X. essentially little at that’s it on indicated as XXXX, As of in the the accretion back full see to and just half EPS a then

Kevin Barker

was see potential Okay. outlook earn estimated acquisition, given this on earn When value, from book about earnings back the the that you think back your tangible what today? you

Jennifer LaClair

will weren’t kind this back Yes, very to so upfront growing be this. take five Kevin, we the book back, it growth, so the value probably about can we’re earn of focus question, earn the our a on But achieve CECL to and based CECL quick again years comes simply math portfolio. because lot that’s we on costs as the if growing of card back

the that really a company even we X%. know, a we acquired growth value within at think back period, You earn

Kevin Barker

the a place back Is longer. Now, and team mean, build have that a capabilities out build that rather theoretically a product, management lot the a you the that I was is you the versus right? assume potential than would in earn assessment would that assume made, that’s would utilize that I purchase on purchase thought--I you rather out you’d that card

Jennifer LaClair

we’re about best about leveraging perfect walls bank the and Yes, of bought four for can company of we part huge come really Like growth in order. company them brand, without that’s million a feel be we’ve makes the largely book, pay acquire a feel leveraging, again said, and of so EPS absolutely. the J-curve the got scaling, and a them is we earn accrete sense I like multiples this kind our the makes synergies, still IT It We everything because over, growth excess a us that for of as really we and is because our makes painful having inside buying to more J-curve. of It they our bank. to months of perfect the the of earnings here, about for capital, short so three can sense mature sense great think quarter through the I we’ve made. think we back a X period, Kevin, company with funding, of part company customer ecosystem. to investment

the and You are kind going what feel to well, questions of like Kevin. grow, do, earlier else ROTCE great growth of to advance some a heard opportunities the our this we and other around, to you trajectory, what earnings are our step was

Kevin Barker

Okay. Thank you, Jen.

Jennifer LaClair

you. Thank

Operator

with Evercore Pancari ISI. John from comes question next Our

John Pancari

that thinking around then loan at would separately interpret look outstandings yield, your price auto and retail auto you that you look XXXX. XXXX, the how as Morning. could auto a I mentioned expectation bit heard think of wanted you the to you production in if that expectations. color XXXX little I Sanjay. on auto How you into get your more to see terms and assumption at would Thanks. curious you’re as I about

Jennifer LaClair

into really be auto beyond, our strong that the loan in and growth, you’re strong year and translates sheet Yes. robust we just row and X% at really into portfolios a we’re space, yields. at fourth originations this expect lease originations I retail grow Strong would auto yields. right both outstandings to leased same The in lease, so will retail would mean, ’XX expect our balance as John. seeing grow, seeing on we -

side, late the mark lot had say turn. terms ’XX. right there’s that’s continued balance strong flows, on a growth a question now, actually not trends specific yet, of origination so a that going we’re does guide just are really on in mentioned at when I’d bit a We’re around JB of of robust seeing commercial to pricing pricing. pressure the give ’XX, but where Then not positive into more outstanding

either expectations there for positive from way, more I’m ’XX, an income perspective, but statement there’s feeling we really now, the right anything, And good the a upside about forward. to by so for think guide versus us, net and if going way have your yields outstanding of so normalized in I ’XX is hedges we there. are our sharing natural bit a the what much growth, it’s question, modeling robust all positive is these an

John Pancari

it. Got

the to Okay, could Ally at further now thanks. the right auto normalize think Then non-auto begin do the to where as you the we best when offset auto characterize prospects Thanks. help growth moderate, you how you you see out? top abatement within picture would line that the businesses, to as look see on begins ultimately exist

Jennifer LaClair

we’ll continues pleased John. see and Ally whole scale of of them and - scaling really and growth been opportunities Fair you single see as acquisition strong growth expectations balance see you, Definitely really is the opportunities not Fair Lending the sheet opportunities bright robust this on see future on robust finance businesses Square we as but scale every but grower, Fair and We really our opportunities Thank ahead, just We mortgage had shift, portfolios, us mortgage. bring Square and one addition in of up sale focused of purchase, diversification that’s there. in businesses well. space to a seeing to our really we as margin Lending. be quarter, we’ll our strong across steady that Ally highest unsecured existing to improvement year in one for our and refinance you one Ally this see Thank further on is notion offers and vertical we’re this we’re that obviously Lending, only in up explained right gain our robust and originations you actually healthcare home really mix corporate ahead we’ve also every growth. what retail Square a but that, seeing so picking

Daniel Eller

Investor brings with of to out that you hand us everyone the follow-ups Relations joining, Kevin, today. appreciate close to remind All right, you back it end the have. to thank may to we to folks additional reach and I’ll call. our time everyone. That you We

Operator

presentation. conclude today’s Ladies gentlemen, and does this

You a day. wonderful now and disconnect may have

Ally Financial (ALLY) 21 Oct 212021 Q3 Earnings call transcript