Bulletin: Ally Financial Inc.'s Acquisition Of Fair Square Does Not Affect Financial Expectations

NEW YORK (S&P Global Ratings) Oct. 25, 2021--S&P Global Ratings today said Ally Financial Inc.'s (BBB-/Stable/A-3) announced $750 million all-cash acquisition of credit card provider Fair Square Financial will not materially affect its financial expectations for Ally, given the relatively small size of the acquisition ($763 million of loan assets, compared with Ally's $114.5 billion of finance receivables and loans as of June 30, 2021). While we expect the acquisition to benefit diversification and profitability, particularly as Ally scales the credit card product by offering it to its existing deposit customers, we believe these benefits are offset by increased credit risk from the credit card portfolio and inherent earnings volatility due to that product's higher loss rates. While the company

...October 25, 2021 NEW YORK (S&P Global Ratings) Oct. 25, 2021--S&P Global Ratings today said Ally Financial Inc.'s (###-/Stable/A-3) announced $750 million all-cash acquisition of credit card provider Fair Square Financial will not materially affect its financial expectations for Ally, given the relatively small size of the acquisition ($763 million of loan assets, compared with Ally's $114.5 billion of finance receivables and loans as of June 30, 2021). While we expect the acquisition to benefit diversification and profitability, particularly as Ally scales the credit card product by offering it to its existing deposit customers, we believe these benefits are offset by increased credit risk from the credit card portfolio and inherent earnings volatility due to that product's higher loss rates. While the company disclosed 50-55 basis points of common equity Tier 1 would be consumed at closing, we continue to expect the S&P Global Ratings risk-adjusted capital ratio will remain near the high...

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