Ally Financial Inc at BancAnalysts Association of Boston Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ruth Nagle - Fidelity Investments - Analyst : So I'd like to just kind of start with overall trends, and we can kind of then double-click on things after that. But what are you seeing in the business today that kind of gets you most excited about the future? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 4:15PM, ALLY.N - Ally Financial Inc at BancAnalysts Association of Boston Conference

Question: Ruth Nagle - Fidelity Investments - Analyst : So Russ, I'm going to start with the balance sheet and kind of get into some of the drivers there. But you're not really looking to grow the balance sheet. I think you're kind of assuming interest earning assets are pretty flat. What are the parts where you think that you do want to grow? And what are the parts that you're not growing?

Question: Ruth Nagle - Fidelity Investments - Analyst : And so now that you do you have that deposit funding or -- in a really strong position with like you said, 90% loans to deposits. But how has that changed? Or how will that change your deposit strategy?

Question: Ruth Nagle - Fidelity Investments - Analyst : So I mean Ally has been kind of a done well in kind of the category of being a liability-sensitive benefiting from lower rates. But you've also talked, I think, in the last conference call, there was some discussion about some choppiness that comes with that. So can you maybe just talk about what the first and second order issues of the margin are with lower rates or no rates? You've talked a lot about the balance sheet dynamics, but what happens as rates move down? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 4:15PM, ALLY.N - Ally Financial Inc at BancAnalysts Association of Boston Conference

Question: Ruth Nagle - Fidelity Investments - Analyst : Okay. Maybe we could shift over to talk about retail auto pricing, loan pricing. And you've kind of seen -- you have seen yields move up. Can you just -- what are the expectations for originated yields and especially as rates do move down?

Question: Ruth Nagle - Fidelity Investments - Analyst : Russ, is there anything you can share on the competitive environment and kind of what you're seeing because it felt like there was some capital that left the business. Is it coming back? Is it -- is competition -- are there any changes in competition?

Question: Ruth Nagle - Fidelity Investments - Analyst : So I want to kind of shift a little bit and talk about kind of the very operating environment since pandemic and what happened with used car prices and consumer and everything that was related around that? But before we kind of get into the credit -- portfolio credit trends, could you just talk more broadly about what you're seeing in the consumer and kind of the view you have at Ally?

Question: Ruth Nagle - Fidelity Investments - Analyst : So maybe could you talk a little bit about the different vintages of what you're seeing? And as you mentioned, '22 was kind of the peak in car prices and probably creates more severity at this point when there are issues. But what's the kind of underlying difference between what we're seeing in the early 2024 and '23 versus '22 vintages?

Question: Ruth Nagle - Fidelity Investments - Analyst : And so have you continued to do curtailment? I know -- I mean, you said started early 2023, but has that been progressive?

Question: Ruth Nagle - Fidelity Investments - Analyst : Okay. All right. Great. I'm going to switch topics again, and I want to talk -- you mentioned it earlier in your overview, but the kind of fee-related businesses and how strong you're doing in insurance and corporate finance. Can you just talk a little bit about the trends in the insurance business? And really how you're finding the success that you're having in insurance? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 4:15PM, ALLY.N - Ally Financial Inc at BancAnalysts Association of Boston Conference

Question: Ruth Nagle - Fidelity Investments - Analyst : And Russ, just to be clear, you have reinsurance, I'm just thinking about storms and hurricanes and things like that. So you're well covered in that regard.

Question: Ruth Nagle - Fidelity Investments - Analyst : Okay. Great. And then on the Corporate Finance business, I mean, you said you've been in 25 years. So it's not a new business. But maybe you could just -- maybe -- I think maybe I'd be good to just understand it a little bit better of who are the -- who are you financing? What -- where is the deal flow coming from? What sort of risk do you have in this business?

Question: Ruth Nagle - Fidelity Investments - Analyst : Okay. I'm going to take a pause and see if there are any questions in the audience. We'll start here with Ryan. There's a -- Unidentified Participant Good see you again, Russ. Russ, maybe to talk about the net interest margin. You commented that rates down faster and larger increments would be more negative for the margin. Maybe just talk about how a slower cutting cycle along with the more and potentially even a pause from the Fed in a more steep rate curve would impact both the path of the margin and your ability to achieve a 4% NIM?

Question: Ruth Nagle - Fidelity Investments - Analyst : Okay. I have a question on the charge-off process. And obviously, I don't understand the lead lag times of that book. But on the one hand, you're telling us that the '24 vintages are doing better than the '23, and '23 is doing better than '22 and late '23 is doing better than early '23. But on the other hand, you're telling us that charge-offs exiting this year will be higher than the average, so they're still mounting. So is it that the '22 book is just so outsized relative to '23-'24? What's -- how do you bring those two opposing dynamics together?

Question: Ruth Nagle - Fidelity Investments - Analyst : And would you say that's has gotten better? I know you kind of alluded that the performance of the vintages are better, but is that pressure the same? Or I guess -- and I guess when we think about -- you've done the curtailment, so the mix has improved. But if you kind of stay constant with that consumer, is there a change?

Question: Ruth Nagle - Fidelity Investments - Analyst : Okay. One more question, I think. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 4:15PM, ALLY.N - Ally Financial Inc at BancAnalysts Association of Boston Conference Unidentified Participant Maybe one more question, Russ. So you made some positive comments about credit stabilizing and then eventually improving. Just how do you think about the evolution from both a frequency and a severity standpoint, just given the fact that on one side, you've made these curtailments of the book, but we also have used car prices stabilizing? And what do we need to see for this transition to happen from kind of above seasonally adjusted losses to more in line or improve it?

Question: Ruth Nagle - Fidelity Investments - Analyst : All right. That's very helpful. Yes. Thank you.