• Adjusted EPS: $2.35 for 2024.
• Core Pre-Tax Income: $1 billion for 2024.
• Revenue: $8.2 billion for 2024.
• Consumer Originations: $39 billion in auto finance.
• Origination Yields: 10.4% in auto finance.
• Insurance Written Premiums: $1.5 billion.
• Corporate Finance Pre-Tax Income: Over $400 million with an ROE of 37%.
• Deposit Balances: $143 billion, with 230,000 new customers added.
• Net Financing Revenue: $1.5 billion in Q4 2024.
• Adjusted Other Revenue: $564 million, up 13% year over year.
• Provision Expense: $557 million, down year over year.
• Non-Interest Expense: $1.4 billion, including $140 million in one-time items.
• Net Interest Margin (NIM): 3.33% for Q4 2024.
• Cost of Funds: Decreased 17 basis points quarter over quarter.
• CET1 Ratio: 9.8%.
• Consolidated Net Charge Off Rate: 159 basis points.
• Retail Auto Net Charge Offs: 234 basis points.
• Retail Auto Portfolio Yield: 9.6% for Q4 2024.
• Lease Gains: $3 million in Q4 2024.
• Corporate Finance Loans: $9.6 billion in HFI loans.
• 2025 NIM Outlook: Approximately 3.4% to 3.5%.
• Retail Auto Net Charge Offs Outlook for 2025: 2% to 2.25%.

• Warning! GuruFocus has detected 4 Warning Sign with ABT.

Release Date: January 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ally Financial Inc (NYSE:ALLY) delivered adjusted EPS of $2.35, core pre-tax income of $1 billion, and revenues of $8.2 billion in 2024.
• The company maintained a strong deposit franchise, adding over 230,000 new customers and reaching $143 billion in balances.
• Corporate finance delivered record pre-tax income of more than $400 million with an ROE of 37% and zero net charge-offs.
• Ally Financial Inc (NYSE:ALLY) was recognized by Fast Company as a brand that matters for the third consecutive year.
• The company achieved a top 10% ranking for employee engagement for the fifth consecutive year, seven points higher than the financial services benchmark.

Negative Points

• Ally Financial Inc (NYSE:ALLY) faced financial pressure due to volatile interest rates and inflation impacting consumer behavior.
• The company announced a workforce reduction, resulting in a $22 million restructuring charge.
• The sale of the credit card business is expected to impact net interest margin (NIM) by approximately 15 basis points.
• Retail auto net charge-offs increased to 234 basis points, reflecting ongoing challenges in the consumer finance space.
• The company carries an elevated population of late-stage delinquent accounts, posing a risk to future credit performance.

Q & A Highlights

Q: Russ, could you elaborate on the better-than-expected credit performance in the fourth quarter and how you see losses progressing? Could we exit the year below a 2% seasonally adjusted loss rate? A: Russell Hutchinson, CFO: Our credit outlook has been choppy, but we saw favorable trends in the fourth quarter, including better flow to loss and severity. While we saw improvement, the seasonally adjusted annualized loss rate was still north of 2%. For 2025, we've guided a range of 2% to 2.25% for net charge-offs, considering elevated delinquencies and stable used car values. If macro conditions remain favorable, we could see losses at the lower end of the range.

Q: Post the sale of the card business, you mentioned a 40 basis point capital increase. Can you provide more color on potential uses for this capital and your outlook on NIM? A: Russell Hutchinson, CFO: Our priority is investing in core businesses with accretive risk-adjusted returns. We may also restructure the securities portfolio and eventually return capital through share repurchases. The card sale impacts NIM by about 15 basis points this year, but we expect high 3% NIM to support mid-teens ROTCE. A 4% NIM is not required but remains possible.

Q: How much of the originated yield drop is due to consumer selection versus competition? A: Russell Hutchinson, CFO: The 90 basis point drop in originated yield from Q3 to Q4 was due to benchmark rates and mix, with S-Tier increasing from 43% to 49%. We expect the mix to normalize, and our asset betas are favorable compared to expectations.

Q: Could you discuss the impact of unwinding curtailment actions on originated yield and the decision behind it? A: Russell Hutchinson, CFO: We expect unwinding curtailment to offset benchmark rate impacts, maintaining yields in the high 9s to 10%. Curtailment adjustments will be gradual, based on continuous evaluation of credit performance. It's not a one-time process but involves ongoing tweaks to underwriting and application processing.

Q: Can you provide more detail on the mitigation actions that led to low flow-through rates and their future impact? A: Russell Hutchinson, CFO: We've improved repossession timing, communication strategies, and modifications/extensions. These actions have led to better outcomes, keeping borrowers in their cars longer and improving collections. We monitor recidivism and stick rates to ensure we're not just delaying issues.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.