Release Date: April 17, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ally Financial Inc (ALLY, Financial) reported adjusted earnings per share of $0.58, core pretax income of $247 million, and adjusted net revenue of $2.1 billion, reflecting solid execution across core businesses.
- The company achieved a Net Promoter Score well ahead of industry averages, with positive brand social sentiment nearly 90%, indicating strong customer trust and loyalty.
- Ally Financial Inc (ALLY) successfully closed the sale of its credit card business, strengthening its balance sheet and reducing interest rate risk.
- The Auto Finance business saw consumer originations of $10.2 billion, driven by a record 3.8 million applications, highlighting strong dealer relationships and franchise scale.
- The Corporate Finance segment delivered a strong quarter with pretax income of $76 million and a 25% ROE, demonstrating resilience across economic cycles.
Negative Points
- GAAP noninterest expense was impacted by a write-down of goodwill associated with the transfer of card assets to held for sale, contributing to a GAAP loss per share of $0.82 for the quarter.
- The insurance segment faced elevated weather-related losses totaling $58 million, marking the highest first quarter of weather-related losses in the company's history.
- Retail auto net charge-offs, while improved, remain elevated, with ongoing macroeconomic uncertainty posing potential risks to credit performance.
- The sale of the credit card business is expected to have a 20 basis point negative impact on net interest margin on a run rate basis.
- The company faces uncertainty due to evolving trade policies and tariffs, which could impact used car prices and overall business performance.
Q & A Highlights
Q: Michael, how do you think the evolving uncertainty related to tariffs impacts your business?
A: Michael Rhodes, CEO: The environment is fluid, but we are in a position of strength. Our balance sheet, capital strength, and credit risk position are robust. We've taken strategic steps like selling our credit card business and repositioning our securities portfolio to manage this uncertainty. In the near term, tariffs might benefit used car prices and demand. In the medium term, the focus will be on macroeconomic impacts like inflation and consumer health. Overall, we are executing well and are well-positioned to handle this environment.
Q: Russ, regarding the NIM, how does the current rate backdrop align with your guidance, and what is the mix of originations you're seeing now?
A: Russ Hutchinson, CFO: Our guidance of $3.4 billion to $3.5 billion for 2025 considers various rate scenarios, including potential rate cuts. Our business adjusts over time, and we avoid quarter-by-quarter guidance. Our application volume is at record levels, allowing us to be selective in credit and rate. Our originated yield is strong at 9.8%, with a high proportion of originations in our highest credit quality tier.
Q: Jeff Adelson from Morgan Stanley asked about the NIM outlook for the second quarter and the rest of the year.
A: Russ Hutchinson, CFO: We reiterated our full-year guidance of $340 million to $350 million. The sale of our credit card business will impact NIM by 20 basis points in Q2, but we expect to offset this through deposit pricing changes, CD maturities, and benefits from securities repositioning. Our fundamentals remain strong, and we anticipate continued NIM expansion.
Q: On credit performance, how quickly can you achieve a loss rate below 2%?
A: Russ Hutchinson, CFO: We provided a full-year range of 2% to 2.25% for 2025. While flow to loss rates are strong and delinquency trends show improvement, we remain cautious due to elevated delinquencies and macroeconomic uncertainty. We will keep the full range intact and update as necessary.
Q: Robert Wildhack from Autonomous Research asked about unwinding curtailment and its impact on yield and NIM.
A: Russ Hutchinson, CFO: We are cautious about unwinding curtailment due to the uncertain environment. Our 2024 vintages are outperforming expectations, providing some cushion. We will continue to monitor the market closely and adjust accordingly.
Q: Moshe Orenbuch from TD Cowen inquired about the factors driving changes in origination yield.
A: Russ Hutchinson, CFO: The increase in originated yield to 9.8% is primarily due to a shift in our origination mix, with a decrease in the highest credit quality tier from 49% to 44%. This drove the majority of the yield increase.
Q: John Armstrom from RBC Capital Markets asked about strategic priorities following the sale of the card business.
A: Michael Rhodes, CEO: Our focus is on achieving mid-teens returns by executing on our commitments. Strategically, we are deepening relationships in our core businesses, such as dealer financial services and our digital bank. We are not pursuing new diversification or M&A but are focused on areas where we have a competitive advantage.
Q: What is the outlook for used car prices, and how does it affect your business?
A: Russ Hutchinson, CFO: Our models anticipate used car prices to remain elevated, about 20% above pre-pandemic levels. Tariffs could positively impact used vehicle values, benefiting our credit side and lease gains. However, it's too early to predict exact outcomes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
