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Ally Financial (ALLY -2.32%)
Q3 2024 Earnings Call
Oct 18, 2024, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Q&A
- Participants
Prepared Remarks:
Operator: Welcome to Ally Financial’s Q3 2024 earnings call. It’s being recorded. Now I’ll hand it over to Sean Leary, our head of investor relations.
Sean Leary: Thank you. Good morning and welcome. Our CEO, Michael Rhodes, and CFO, Russ Hutchinson, will discuss our results before we take your questions. You can find our presentation on our investor relations site.
CEO Remarks:
Michael Rhodes: Good morning, everyone. I’m excited about Ally’s future, though we anticipate some earnings challenges in the coming quarters. Our adjusted EPS for the quarter is $0.95, aided by significant tax credits related to EV leases. However, our core pre-tax income of $108 million is below our potential. We expect better performance as we reduce risks and expect deposit margins to improve as interest rates drop.
In auto finance, we originated $9.4 billion, maintaining a yield of 10.5% and a focus on lower-risk loans. Our bank deposits totaled $141 billion, supporting our strong customer service and digital experiences. We aim to grow our corporate finance and insurance segments as well.
CFO Remarks:
Russ Hutchinson: Our net financing revenue was $1.5 billion, lower than last year due to rising costs and lower average earning assets. Our focus on expense management continues, despite an increase in provision expenses due to higher net charge-offs. Our NIM is currently at 3.25%, with room for improvement.
Our capital position is strong, with CET1 at 9.8%. We expect regulatory changes to impact this but remain committed to growing our capital buffer.
Q&A:
Ryan Nash: Can you clarify your credit loss outlook and where we might see improvements?
Russ Hutchinson: We expect an increase in charge-offs in Q4, driven mainly by seasonal trends. However, the ’23 vintage is performing better than ’22, giving us confidence in lower losses moving forward.
John Pancari: Can you update us on your expected charge-off rates?
Russ Hutchinson: We’ve updated our charge-off guidance to 2.25%-2.30%, reflecting current market pressures and expectations for improvement in future vintages.
Sanjay Sakhrani: How do recent curtailments affect your risk levels?
Russ Hutchinson: Our relationships with dealers are strong, and we expect these strategies to help reduce risky exposures.
Mark Devries: What impact will changes to your EV leasing accounting have on your NIM?
Russ Hutchinson: Switching to deferral method accounting may raise our NIM eventually, reflecting the lease economics more similarly to traditional financing.
That wraps up our earnings call. Thank you for joining us.
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