Ally Financial Inc.

The stable outlook reflects S&P Global Ratings' expectation that the company is well positioned to withstand elevated credit losses and charge-offs, as assumed in our forecast. We also expect earnings from Ally's auto finance and direct banking operations to remain strained from still elevated cost of funding. 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 in the next six to 12 months, or if its risk appetite increases. We could also lower the ratings if Ally's capital ratios decline, most notably if its CET1 ratio goes below management's stated minimum target, or if our RAC ratio

...We think Ally Financial Inc.'s continued concentration in auto lending exposes it to trends in the auto and auto finance industries, as well as consumer health. Ally's auto financing segment accounted for 79% of total on-balance-sheet loans (about 80% to retail consumers) and an even higher portion of total net revenue if considering auto-related insurance, for the nine months ended Sept. 30, 2024. Mortgage loans and nonauto corporate finance made up most of the remainder of the portfolio. We expect Ally's asset quality metrics to continue to deteriorate until at least early 2025, albeit at a meaningfully slower pace if compared with 2023 and the first nine months of 2024. In our view, Ally's relatively aggressive underwriting, between late 2021 and early 2023, caused its asset quality to deteriorate early to worse than pre-pandemic levels. The 30+ day delinquency rate in the auto retail loan portfolio increased to 4.51% as of Sept. 30, 2024, up 66 basis points (bps) from Sept. 30, 2023...

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