Ally Financial Inc.

The stable outlook reflects S&P Global Ratings' expectation that despite elevated credit losses and charge-offs in the next six to 12 months, the company is well positioned to withstand an economic slowdown. We also expect earnings from Ally's auto finance and direct banking operations to remain under pressure as long as interest rates continue to rise. However, we expect its capital ratios will remain adequate, including a risk-adjusted capital (RAC) ratio of 8%-10%. We could lower the ratings if Ally's asset quality deteriorates substantially more than we anticipate or if its risk appetite increases. We could also lower the ratings if Ally's capital ratios decline, most notably if its common equity Tier 1 (CET1) ratio dips below management's stated minimum

...We believe Ally Financial Inc.'s continued concentration in auto lending exposes it to trends in the auto and auto finance industries, as well as worsening consumer health (especially in the subprime segment). Ally's auto financing segment accounted for 78% of total on-balance-sheet loans (about 82% to retail consumers) and an even higher portion of total net revenue if considering auto-related insurance, for the nine months ended Sept. 30, 2023. Mortgage loans and nonauto corporate finance made up most of the remainder of the portfolio. There could be further changes in management or strategy once Ally's new CEO takes over. Current CEO Jeffrey Brown is stepping down by the end of January 2024, after nine years. The company has not yet announced his successor, and Ally's new CFO started only in July 2023. We are uncertain whether the company's strategy could change as a result, particularly in businesses outside of auto lending, amid subdued earnings, rising delinquencies, and cost-cutting...

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