Ally Financial conducted its earnings call for the third quarter of 2024, ending on September 30. The call took place on October 18, 2024, at 9:00 a.m. ET, covering prepared remarks, a Q&A session, and introducing call participants. The conference call was initiated by the operator, who handed over to Sean Leary, the head of investor relations, followed by presentations from the CEO, Michael Rhodes, and the CFO, Russ Hutchinson.
The company discussed its performance and future outlook while referencing materials available on their investor relations website. Initially, Rhodes expressed enthusiasm about Ally’s prospects but acknowledged ongoing earnings challenges. Despite these short-term hurdles, he indicated optimism due to positive underlying trends in core business areas like auto finance, banking, and corporate finance. In particular, Ally is seeing growth in its insurance segment and benefits from strong deposit contributions from Ally Bank, alongside record-high earnings in corporate finance.
For Q3 2024, Ally reported an adjusted EPS of $0.95, factoring in significant tax credits linked to electric vehicle (EV) lease volumes, while core pre-tax income was $108 million. The discussion highlighted the volatility encountered due to fluctuating interest rates and consumer strain from inflation. Rhodes elaborated on Ally’s strategic steps to reduce origination losses and leverage a liability-sensitive balance sheet in a potential environment of falling rates, emphasizing a disciplined approach to capital and expense management.
During the call, Hutchinson, the CFO, provided detailed financial insights. Net financing revenue decreased year over year due to factors such as lower average earning assets and higher cost of funds. However, adjusted other revenue increased by 13% from the previous year. The provision expense rose, influenced by higher net charge-offs and reserve builds. Retail auto net charge-offs especially indicated seasonal patterns and elevated delinquency rates.
Moving forward, Hutchinson outlined the company’s strategy for expanding net interest margin (NIM) over the medium term as deposit portfolios refinance and asset mix shifts to more favorable categories. The CFO also explained Ally’s retail auto underwriting adjustments aimed at minimizing risk and optimizing returns.
Subsequent discussions covered sector highlights in auto, insurance, corporate finance, and mortgage, noting strategic shifts and performance metrics. For instance, in insurance, premium volumes reached a record high, contributing positively to results despite rising losses due to factors like Hurricane Helene.
In the Q&A portion, analysts inquired about the firm’s credit outlook and other strategic priorities. Executives expressed confidence in credit improvements over time owing to tighter underwriting standards and mitigating factors like retreating peak vehicle values. Additionally, Ally’s focus on maintaining competitive dealer relationships while navigating credit challenges and managing future capital requirements was discussed. The dialogue also touched on potential accounting changes for EV lease tax credits aimed at aligning economic benefits with traditional lease contracts.
In closing, both the CEO and CFO reinforced Ally’s commitment to achieving compelling financial returns through disciplined capital and expense management amidst navigating near-term volatility.
