Core Viewpoint - Ally Financial Inc. reported third-quarter 2024 results that exceeded Zacks Consensus Estimates, with both top and bottom lines showing year-over-year growth [1] Financial Performance - Ally Financial's shares declined by 2% following the quarterly results announcement, attributed to a challenging operating environment characterized by high interest rates and inflationary pressures [2] - The company's stock fell 10.2% in the third quarter, contrasting with a 6.2% increase in the industry [3] Asset Quality - A significant concern was the deterioration in asset quality, with a provision for loan losses of $645 million, a 27% increase year over year [5] - Net charge-offs (NCOs) rose to $517 million or 1.50%, up from $456 million or 1.31% in the prior-year quarter, driven by an 18.8% increase in retail auto loan NCOs [5][6] Revenue Insights - Net financing revenues, the largest revenue source for Ally Financial, decreased by 2.9% to $1.49 billion due to lower average earning assets and higher funding costs [6] - Total other revenues surged by 41.4% year over year to $615 million, supported by growth in insurance and other revenue streams [9] Net Interest Margin (NIM) - The net interest margin contracted by 2 basis points to 3.22%, influenced by the asset-sensitive balance sheet [7] - NIM is projected to be around 3.20% for 2024, down from earlier guidance of approximately 3.30% [11] Strategic Initiatives - Ally Financial is diversifying into mortgage, wealth management, and online brokerage businesses, and launched Ally.ai, an AI platform to enhance operations [12] - The company sold its point-of-sale financing business, Ally Lending, in March 2024 to focus on core business growth [13] Future Outlook - The company anticipates increased loan losses in 2024, with retail auto NCO rates projected between 2.25% and 2.30% [14] - The Zacks Consensus Estimate for 2024 earnings indicates a 1.3% decline year over year, while 2025 earnings are expected to grow by 40.9% [15] Valuation Metrics - Ally Financial stock is currently trading at a 12-month trailing price-to-tangible book (P/TB) ratio of 0.88X, below the industry average of 1.29X [16] - Compared to peers, Ally's stock appears undervalued, with Capital One at 1.33X and SLM at 2.64X [17]

Group 1 - Ally Financial's shares have increased by 48% over the past year, indicating strong performance, but recent performance has declined due to rising credit cost concerns [1] - Q3 earnings results have not alleviated investor concerns regarding credit costs [1]

Core Viewpoint - Ally Financial Inc. is actively engaging with investors and stakeholders through presentations, highlighting its commitment to transparency and communication in the financial services sector [1]. Group 1: Company Overview - Ally Financial Inc. is recognized as the nation's largest all-digital bank and has a leading position in the auto financing industry [2]. - The company serves approximately 11 million customers, offering a comprehensive range of online banking services, including deposits, mortgage, and credit card products [2]. - Ally Financial also provides securities brokerage and investment advisory services, along with a robust corporate finance business that supports equity sponsors and middle-market companies [2]. Group 2: Upcoming Events - The Chief Financial Officer of Ally Financial, Russ Hutchinson, will present at the BancAnalysts Association of Boston Conference on November 7, 2024, at approximately 11:15 a.m. ET [1]. - A live webcast of the presentation will be available on the company's Investor Relations website, with a replay option following the event [1].

Core Insights - Ally Bank is recognized as a leading auto lender and operates a strong online banking platform for consumers [1] - The recent earnings report highlights positive financial performance, contributing to the stock's appeal [1] Financial Performance - Ally Bank's latest earnings indicate robust growth, which has led to increased investor interest [1] - The stock has been actively purchased by investors, reflecting confidence in its future prospects [1]

Group 1 - 3D Systems (DDD) is a leading provider of 3D content-to-print solutions, with a Zacks Consensus Estimate for current year earnings revised downward by 291.7% over the last 60 days [1] - 1-800-FLOWERS.COM (FLWS) is a leading e-commerce provider of floral products and gifts, with a Zacks Consensus Estimate for current year earnings revised downward by 51.4% over the last 60 days [1] - Ally Financial (ALLY) is a diversified financial services company, with a Zacks Consensus Estimate for current year earnings revised downward by almost 21.1% over the last 60 days [1]

Core Viewpoint - Ally Financial reported third-quarter 2024 adjusted earnings of 95 cents per share, exceeding the Zacks Consensus Estimate of 81 cents, reflecting a 14.5% increase from the previous year [1] Financial Performance - Total GAAP net revenues reached $2.1 billion, a 6.9% increase year-over-year, although it slightly missed the Zacks Consensus Estimate of $2.12 billion [3] - Net financing revenues decreased by 2.9% year-over-year to $1.49 billion, primarily due to higher funding costs and lower average earning assets [3] - Total other revenues surged by 41.4% year-over-year to $615 million, surpassing the projected $517.8 million [3] - Total non-interest expenses decreased marginally to $1.23 billion, reflecting effective expense management, compared to the estimate of $1.29 billion [3][4] Credit Quality and Loan Performance - Non-performing loans stood at $1.27 billion, down 15.6% year-over-year, better than the estimate of $1.32 billion [5] - Net charge-offs increased by 13.4% year-over-year to $517 million, aligning closely with the projected figure [5] - The provision for loan losses rose by 27% year-over-year to $645 million, exceeding the estimate of $589.2 million [5] Capital Ratios - As of September 30, 2024, the total capital ratio improved to 12.9%, up from 12.5% in the prior year, while the tier 1 capital ratio increased to 11.2% from 10.7% [7] Share Repurchase Activity - The company did not engage in any share repurchases during the reported quarter [8] Market Outlook - The company faces challenges due to deteriorating credit quality and rising operating expenses, but efforts to diversify revenue streams may support profitability [9]

Group 1 - The CEO of Ally Financial, Michael Rhodes, indicated that the company's upcoming quarters will be "choppy" due to market conditions [1] - Ally has implemented stricter borrower standards, focusing on risk-adjusted returns rather than origination volume, leading to improved borrower credit quality since early 2023 [1] - The pre-tax income in the auto segment for Ally was reported at $175 million, a decrease of $202 million year-over-year, primarily due to higher retail net charge-offs and loss reserves [1] Group 2 - CFO Russell Hutchinson highlighted the unique challenges faced by the bank, including higher prices for used vehicles and elevated loss content, particularly from the 2022 vintage [2] - The bank is experiencing increased delinquencies and charge-offs, attributed to borrowers struggling with high inflation, cost of living, and a weakening employment situation [3] - Credit bureau data indicates that the trends observed by Ally are consistent with industry patterns, providing some confidence in their assessment of borrower conditions [3]

Financial Data and Key Metrics Changes - Adjusted EPS for Q3 2024 was $0.95, influenced by significant tax credits related to EV lease volumes, while core pre-tax income was $108 million, indicating room for improvement [5][15] - Net financing revenue excluding OID was $1.5 billion, lower year-over-year due to reduced average earning assets and higher cost of funds [13] - Net interest margin (NIM) excluding OID decreased to 3.25%, down 5 basis points from the prior quarter [15] Business Line Data and Key Metrics Changes - In the Auto segment, pre-tax income was $175 million, down from the prior year due to higher funding costs and provision expenses [31] - Insurance written premiums reached a record $384 million, driven by new OEM relationships and higher inventory exposure [36] - Corporate finance core pre-tax income was $94 million, with end-of-period HFI loans increasing to $10.3 billion, up $600 million quarter-over-quarter [38] Market Data and Key Metrics Changes - Retail deposits at Ally Bank totaled $141 billion, with a decline of $600 million in the quarter, aligning with expectations as loan balances also decreased [10] - The credit card portfolio showed improved performance, with net charge-offs down to 9.9% from 12.6% in the prior quarter [23] Company Strategy and Development Direction - The company is focused on margin expansion and revenue growth, with a strong emphasis on capital and expense discipline [8][42] - Ally aims to achieve a medium-term NIM target of 4%, supported by a liability-sensitive balance sheet and a favorable asset mix shift [16][40] - The company is diversifying revenue streams, particularly in insurance and auto finance, with expectations of generating $1.5 billion in written premiums this year [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the near term due to volatility in interest rates and consumer strain from inflation, but expressed confidence in the company's ability to deliver compelling returns over time [4][46] - The outlook for credit costs remains elevated, but management is optimistic about the normalization of losses as underwriting changes take effect [45][61] Other Important Information - CET1 ratio increased to 9.8%, with over $4 billion of excess capital above the required minimum [21] - The company is evaluating a potential change in accounting treatment for EV lease tax credits, which could impact CET1 by approximately 20 basis points [35] Q&A Session Summary Question: Expectations for retail auto loss rates - Management anticipates that the increase in loss rates for Q4 will primarily be seasonal, with confidence in eventual normalization due to underwriting changes [49][50] Question: Timing for NIM inflection - Management reiterated that while there are near-term pressures, the medium-term outlook remains unchanged, targeting a 4% NIM [53][54] Question: Confidence in revised charge-off guidance - Management explained that the revision to charge-off guidance reflects broader industry trends and acknowledged the need for caution in timing expectations [56][61] Question: Performance of new underwriting cohorts - Management confirmed that the cohorts are performing better than expected, but acknowledged some underperformance in delinquency rates [66][68] Question: Long-term targets and their feasibility - Management believes that achieving mid-teens returns is feasible, contingent on credit normalization, margin expansion, and effective expense management [72][76]

Core Insights - Ally Financial reported $2.1 billion in revenue for Q3 2024, a year-over-year increase of 6.9% and an EPS of $0.95 compared to $0.83 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] - The company demonstrated a revenue surprise of +2.01% and an EPS surprise of +66.67% compared to analyst expectations [1] Financial Performance Metrics - Net interest margin was reported at 3.2%, slightly below the estimated 3.3% [2] - Efficiency Ratio stood at 58.3%, better than the average estimate of 58.6% [2] - Book value per share was $40.70, exceeding the estimate of $38.93 [2] - Net charge-offs to average finance receivables and loans outstanding were 1.5%, better than the estimated 1.6% [2] - Gain on mortgage and automotive loans was $6 million, surpassing the estimate of $5.71 million, reflecting a +50% change year-over-year [2] - Net financing revenue was $1.49 billion, slightly below the average estimate of $1.51 billion, representing a -2.9% year-over-year change [2] - Total other revenue reached $615 million, exceeding the estimate of $552.07 million, with a +41.4% year-over-year change [2] - Insurance premiums and service revenue earned were $359 million, above the estimate of $344.37 million, showing a +12.2% change year-over-year [2] - Total financing revenue and other interest income was $3.57 billion, below the average estimate of $3.62 billion, indicating a -0.6% year-over-year change [2] - Other (loss) / gain on investments, net was $74 million, significantly higher than the estimate of $37.55 million, with a year-over-year change of -280.5% [2] - Other income, net of losses was $176 million, exceeding the estimate of $158.44 million, reflecting a +15.8% year-over-year change [2] - Interest on loans held-for-sale was $5 million, below the estimate of $7.19 million, representing a -28.6% change year-over-year [2] Stock Performance - Shares of Ally Financial returned +2.5% over the past month, underperforming the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]

Company Performance - Ally Financial reported quarterly earnings of $0.95 per share, exceeding the Zacks Consensus Estimate of $0.57 per share, and up from $0.83 per share a year ago, representing an earnings surprise of 66.67% [1] - The company posted revenues of $2.1 billion for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.01%, compared to year-ago revenues of $1.97 billion [1] - Over the last four quarters, Ally Financial has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [1] Market Performance - Ally Financial shares have increased approximately 2.6% since the beginning of the year, while the S&P 500 has gained 22.5% [2] - The current Zacks Rank for Ally Financial is 4 (Sell), indicating expected underperformance in the near future [4] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.81 on revenues of $2.12 billion, and for the current fiscal year, it is $2.77 on revenues of $8.17 billion [4] - The trend for estimate revisions ahead of the earnings release was unfavorable, which may change following the recent earnings report [4] Industry Context - The Financial - Consumer Loans industry is currently in the top 43% of over 250 Zacks industries, suggesting that stocks in the top 50% outperform those in the bottom 50% by more than 2 to 1 [5] - Open Lending, another company in the same industry, is expected to report quarterly earnings of $0.05 per share, reflecting a year-over-year change of +150%, with revenues anticipated to be $29.46 million, up 13.3% from the previous year [5]