Bulletin: Ally Financial Inc.'s Acquisition Of CardWorks Inc. Is Credit Neutral

NEW YORK (S&P Global Ratings) Feb. 18, 2020--S&P Global Ratings said today that although Ally Financial Inc.'s announced acquisition of CardWorks Inc. is relatively small ($4.7 billion of total assets compared to Ally's $180.6 billion of assets as of year-end 2019), we expect the impact on profitability to be more significant given the high yields associated with CardWorks' credit card book. While we expect some benefits from additional diversification and improved profitability, we believe these are offset by increased credit risk from the mostly subprime credit card portfolio and the inherent earnings volatility of that product due to its high loss rates. Pro forma for the transaction, we expect risk-adjusted capital (RAC) will remain at the lower end of the

...February 18, 2020 NEW YORK (S&P Global Ratings) Feb. 18, 2020--S&P Global Ratings said today that although Ally Financial Inc.'s announced acquisition of CardWorks Inc. is relatively small ($4.7 billion of total assets compared to Ally's $180.6 billion of assets as of year-end 2019), we expect the impact on profitability to be more significant given the high yields associated with CardWorks' credit card book. While we expect some benefits from additional diversification and improved profitability, we believe these are offset by increased credit risk from the mostly subprime credit card portfolio and the inherent earnings volatility of that product due to its high loss rates. Pro forma for the transaction, we expect risk-adjusted capital (RAC) will remain at the lower end of the 7% to 10% range we consider adequate. The acquisition has no immediate impact on our ratings on Ally (###-/Stable/A-3). Our ratings on Ally reflect the resiliency of its auto finance business; its disciplined credit...

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