Ally Financial Inc Q3 2024 Earnings Call Transcript

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

Question: Ryan Nash - Goldman Sachs - Analyst : Hey good morning, guys.

Question: Ryan Nash - Goldman Sachs - Analyst : Good. So I appreciate that the next few quarters are going to be choppy. Maybe just to start on credit. I think, Russ, you noted that you expect the rate of change on losses to move lower over time. However, if I start in the near term, if I look at the midpoint of the guidance, I think it implies the fourth quarter loss rate in retail auto could actually see an increase in the year-over-year loss rate of something north of 2.6%. Can you maybe just help us think about where we go from here? And then I know you both mentioned that you're confident that losses will come down over time at '22 peak, the tighter underwriting from the second half of '23 and '24 come through. But do you expect losses to actually be down in '25? And I have a follow-up.

Question: Ryan Nash - Goldman Sachs - Analyst : Got it. And as my follow-up, I appreciate all the new disclosures on the rate sensitivity. Russ, I thought you noted that you expect expansion at some point through '25. If we were to use the forward curve and whatever your deposit pricing expectations are -- and let's assume there's no changes in the lease accounting for now. When do you actually see this NIM inflection occurring? And can you maybe just talk about the pace of improvement when we do see it? Historically, you talked about 5% to 15%. What is that new dynamic look like now? And I fully recognize that we won't get full year guidance until next year, but just trying to understand how you're thinking about the inflection and the pacing over time. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 18, 2024 / 1:00PM, ALLY.N - Q3 2024 Ally Financial Inc Earnings Call

Question: Ryan Nash - Goldman Sachs - Analyst : Thanks, Russ.

Question: John Pancari - EVERCORE ISI - Analyst : Good morning. On the retail auto charge-off guidance, I know you bumped that up to 2.25% to 2.30% from the [2.10%] prior. We've seen a steady updrift here in that charge-off expectation. And what gives you confidence in this revision that it's appropriate? And then maybe can you just elaborate a little bit on the vintage side, in the 2023 vintage, how do you expect that to fare versus the 2022 vintage, given the worst macro backdrop that the 2023 vintage was facing?

Question: John Pancari - EVERCORE ISI - Analyst : Thanks for that, Russ. I appreciate it. And then just on capital, I know you expressed your intent to continue to build capital off the 9.8% level CET1. Can you just remind us where you would like to see that go to, where your target is at this point? Thanks.

Question: John Pancari - EVERCORE ISI - Analyst : Great. Thank you, Russ.

Question: Sanjay Sakhrani - Keefe, Bruyette & Woods North America - Analyst : Thanks. Good morning. (inaudible) on this credit. But maybe just moving to how the cohorts are going. You obviously pivoted to a more conservative underwriting in second quarter '23 onwards. I mean, are those cohorts behaving like you expected them to? Like I know you're 40% S-Tier? Or has something changed even in the behavior of your S-Tier?

Question: Sanjay Sakhrani - Keefe, Bruyette & Woods North America - Analyst : My follow-up question, Michael, maybe it's for you. You've obviously come into this. I'm just curious of what your take on it is? And maybe the question I get from investors or -- is your feelings on the long-term targets, do you think that they might be aggressive? Or do you feel like that makes sense? Thanks.

Question: Mark DeVries - Deutsche Bank - Analyst : Yeah. Thanks. So the geography of where the economics of your EV leasing business fall through the income statement is obviously very different from the other kind of lending and leasing businesses. Could you just talk about how that impacts your ability to get to the 4% NIM?

Question: Mark DeVries - Deutsche Bank - Analyst : Okay. Great. That's helpful. And then just looking at your originated yield, it still looks pretty strong. But can you talk about any impact that recent curtailments may have in your ability to continue to originate at such an accretive yield for your NIM?

Question: Mark DeVries - Deutsche Bank - Analyst : Got it. Appreciate the comments.

Question: Robert Wildhack - Autonomous Research - Analyst : Morning, guys. Bigger picture question on the curtailment. Do you expect that those decisions will lead to a meaningful reduction in your near prime and below exposure? And if so, what's the dealer reaction to that? Because I know you've talked about wanting a lot of application flow from dealers. So I'm curious if the curtailment decisions could have any impact on the flow from dealers and your broader relationship with the dealers as well.

Question: Robert Wildhack - Autonomous Research - Analyst : Okay, thanks. And then just on the competitive intensity, you've been benefiting from a softer competitive environment for a little while now. There might be some indication that at least certain competitors are reentering. Are you seeing that? And what do you think that could mean for both originated yield and risk-adjusted returns going forward?

Question: Robert Wildhack - Autonomous Research - Analyst : Okay. Thank you.

Question: Jeff Adelson - Morgan Stanley - Analyst : Hey, good morning. Thanks for taking my questions. Russ, I guess, just maybe another one on credit. I apologize. I know we've all focused on this so much today. But relative to your update last month on the underperformance versus your expectations, the 10 basis points in charge-offs, 20 basis points in delinquencies in July and August. I was sort of hoping you'd be able to help us understand how the performance has migrated since that? Has the underperformance versus prior expectations sort of stabilized here as you look at September and early October? Or are there any shifts there? And then as it relates to late stage, I think you've been quite clear about that. I was curious about what maybe you're seeing or noticing more in the early-stage side of things as we start to think about 2025 here? Thanks.

Question: Jeff Adelson - Morgan Stanley - Analyst : Just an update on what you're seeing in the early-stage delinquency side?

Question: Jeff Adelson - Morgan Stanley - Analyst : Okay. And then just on the potential accounting changes, is that something that you're hearing externally from external parties? Or does that some represent more productivity on your part to try to present a smoother earnings path and just try to drive more conservatism in the earnings profile?

Question: Jeff Adelson - Morgan Stanley - Analyst : Okay. Great. Thank you, Russ.