Ally Financial ups auto allowances as losses rise

Ally Financial increased its allowance for auto credit losses in the first quarter as delinquencies and net charge-offs rose on a year-over-year basis. 

Credit performance improved on a sequential basis but worsened when compared with a year ago, reflecting seasonal trends. The allowance for auto loan losses sat at a coverage ratio of 3.65% in Q1 2024, flat with Q4 2023 but up 5 basis points (bps) YoY, according to the bank’s earnings supplement today. 

The rate of auto loans 30-plus days delinquent sat at 3.88% in Q1, down 54 bps quarter over quarter but up 64 bps YoY, according to Ally’s earnings presentation. Sixty-plus day delinquencies ticked down 13 bps QoQ to 1.1%, an increase of 30 bps YoY.  

The net charge-off rate climbed to 2.27%, increases of 6 bps QoQ and 59 bps YoY and in line with the bank’s expectations. 

“Losses within the quarter were impacted by softer used values throughout much of the quarter, but we did see stability in March and are exiting the first quarter flat versus December,” Russ Hutchinson, chief financial officer, said during today’s earnings call. 

Originations totaled $9.8 billion on the heels of a record 3.8 million consumer auto applications with a 29% approval rate that held steady from Q4 but inched down 2 percentage points YoY, according to the presentation. Originations ticked up 2.1% QoQ and 3.2% YoY, according to the supplement.  

“We see continued momentum as we grow OEM partnerships and continue leveraging our expansive auto finance dealer network,” Interim Chief Executive Officer Doug Timmerman said during the call. 

Retail auto-originated yield was level with a year prior at 10.9%, with 40% of volume coming from the “highest credit quality tier,” according to the presentation.  

Outstandings came in at $93 billion, down 1.2% on a linked-quarter basis and 1.1% YoY, according to the supplement. Outstanding volumes have been mixed on a YoY basis across most banks so far in Q1, with Bank of America and Chase Auto posting increases, and PNC Financial and Wells Fargo reporting declines.  

Ally Financial during the quarter also deconsolidated $1.1 billion in retail auto loans from its balance sheet through securitized transactions to free up capital, Hutchinson said. The loans were “originated predominantly in 2023, with yields below our average originated yield for the year,” he said.  

Ally Financial issued a $1.1 billion auto asset-backed securities deal backed by prime loans on March 5, according to Finsight, which monitors securities.  

On the commercial front, Ally’s floorplan outstandings totaled $17.3 billion, up 1.8% QoQ and 30.1% YoY, according to the supplement.  

Shares of Ally Financial [NYSE: ALLY] were trading at $38.79 at 3:29 P.M today, 6.95% from market open. Ally has a market capitalization of $11.79 billion.  

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