But Ally's share price fell sharply last year as investors worried those trends would unwind. The company's stock price jumped early in the pandemic as a slowdown in new-car production led to a boom in used-auto business and prices. Investors have long feared the impact of a steep drop in used auto prices on Ally, where used-car loans make up a larger part of the balance sheet than at numerous other auto lenders. The company's executives also said that the value of used cars that are recovered during repossessions may not drop by as much as previously thought, limiting the dollar amount that Ally would ultimately have to charge off. At the end of 2022, delinquencies of at least 30 days rose by 142 basis points. While delinquencies of at least 30 days rose by more than 90 basis points last quarter, the pace of increase has steadily fallen over the past few quarters. But "the acceleration in delinquencies makes it difficult for us to know when peak losses will occur," he added.Īlly executives pointed to a positive trend on that front. The worsening trend in delinquencies "still jibes with lender guidance of peak losses" by the first half of next year, Caintic wrote. The note reviewed delinquency trends at Ally, Capital One Financial, Santander Consumer, CarMax and Carvana. Hecht, the Jefferies analyst, noted that those delinquencies may turn into higher charge-offs as some borrowers struggle to get back on track.Īt several auto lenders, delinquencies rose in September compared with August, suggesting that higher charge-offs may follow early next year as lenders get troubled loans off their balance sheets, according to a note by Stephens analyst Vincent Caintic. That percentage was up from 2.93% a year earlier. "Life sometimes throws you curveballs, and that's what happened in this scenario," he said.ĭuring the third quarter, more Ally borrowers fell behind on their payments, with roughly 3.85% of Ally's retail auto loan total marked as at least 30 days late. Brown described it as a "dream opportunity." He will become president of Hendrick Automotive Group, a large privately held dealership group and an Ally customer. But Brown, who may stay with Ally until the end of January, said that his exit "was not driven at all about any change in confidence" in the company's trajectory. Tougher operating conditions had prompted speculation that Brown's departure might be tied to growing pessimism about the company's outlook. The third quarter had "puts and takes, but reflected a focused execution in an increasingly difficult market," Hecht wrote. To help lower expenses, Ally said this month that it will lay off some employees and reduce its headcount by less than 5%. Given the competitive deposit market, the cost to Ally of offering high-yield savings accounts continues to rise. He argued that the bigger question facing Ally is its expenses. The company's overall performance was "relatively stable," and its credit metrics came in within expectations, Jefferies analyst John Hecht wrote in a note to clients. While loans that Ally made in 2022 remain on track, this year's "shift into higher credit quality loans will ultimately reduce portfolio loss content," Hutchinson said. And it started charging higher rates to riskier borrowers to protect itself in a more uncertain environment. This year, Ally shifted to focus more on loans to consumers with super-prime credit scores. The auto lender has also taken steps to mitigate risks on its balance sheet. Detroit-based Ally has invested heavily in technology and its collections department, Brown said, which has given the company "a much deeper understanding of consumer payment patterns and more options to get consumers current and staying in their cars."
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