Ally Financial Inc. Barclays 24th Annual Global Financial Services Conference

Russ, welcome. Thanks, Jason. Glad to be here.

Great. Thanks, Jason. I am glad you mentioned the improvement we have seen in profitability over the course of the last two years. I think it is really strong evidence that the power of Focus, our Focus strategy, is working. We are doing three things simultaneously. We are growing our core franchises, we are increasing our profitability, and we are managing our risk. That improvement in terms of our performance is anchored in real improvement in our franchises. We have a customer-obsessed culture, and that is delivering for us in terms of the traction we get. If I look at our Dealer Financial Services business, you can see that traction in terms of our application volume. When I look at our Corporate Finance business, it is in our investment portfolio there. When I look at our deposit business, it is that strong customer growth that we see year-over-year.

Across all of our franchises, we are really delivering, and we are seeing the benefits of that delivery in terms of traction with our customers across all three franchises. I think we are pleased with our results so far to date. We expect to be on track with respect to the guidance that we delivered back in January. We are on track with respect to our medium-term targets. I am sure as we talk through this, we will talk a lot about net interest margin. We are dealing with pressure along with the Stellantis relationship from the recalls. Obviously, we have seen the interest rate outlook change. I am glad to say we continue to be on track in terms of the guidance that we delivered. We are managing through those. When you look at retail auto NCOs, I am sure we will talk a lot about retail auto credit as we go through this.

Again, we continue to be on track. We delivered guidance at the beginning of the year with the expectation that the midpoint was a pretty good guess of where we would land within that guidance, and that continues to be our assumption today. I know we will talk a lot. We will probably talk about vintage curves, and we will talk about just some of the headwinds we have seen this year with oil prices, et cetera. Again, we have managed through that, and we continue to be very much on track. Longer term, it is our expectation that we will see retail auto NCOs drift lower towards our originated target range of 1.6%-1.8% as we move forward. We feel pretty good about how credit is developing in terms of the trajectory. In terms of operating expenses and capital efficiency, again, we feel good about how things are progressing there.

First half of the year, you have seen our operating expenses flat to slightly down. We have always talked about a low single digits range going forward, and we entered this year with guidance that we expected OpEx up about 1% over the year. You will start to see that lower single digits materialize over the back half of this year. Again, in our view, that reflects really strong discipline on operating expenses, our commitment to delivering positive operating leverage. On the capital side, we continue to deliver on the story of and, not or. The heavy lifting is behind us in terms of building up our capital ratios, looking at it on an RSA fully phased-in view. As we look forward, we think the first half of this year provides a pretty good template for how we think about capital.

That is, having capital on hand to invest in the growth of our core franchises, prioritizing growth in our highest profitability products, in retail auto loans and Corporate Finance, and at the same time, returning capital to shareholders with our share repurchase program. We look across the board, and we feel pretty good about the trajectory that we have established and the track record over the course of the last couple of years since we launched Focus Forward.

Yeah, no, there's a lot in that question. Maybe where I'll start is, we're pleased with the NIM expansion that we've delivered so far. You dial it back a couple of years, ex cards, our NIM hit about 3%. Second quarter, we were about 3.6%. That expansion is something that we're pleased to have delivered and gives us confidence as we think about the forward. I'd say, look, the NIM story is very much anchored in that customer obsession, that traction that I described with customers beforehand. We see it on both sides of our balance sheet. We exercise a lot of pricing discipline on both sides.

Within retail auto, that application volume that we talked about, it gives us the ability to look at a lot of applications to really assess credit and then to manage our book from a quarter-to-quarter basis in terms of maximizing our risk-adjusted returns. On the deposit side, that strong deposit customer growth that we have provides a nice anchor for us to be disciplined in terms of how we price deposits going forward. That's anchored in real things that we're doing with our customers, our commitment to our dealers, our consistency over a long period of time. I was at The Ally Challenge a few weeks ago just outside of Detroit. I'll tell you, dealer after dealer thanked us for our consistency, our reliability in the market, and I think that pays dividends in terms of the traction we have with our dealers.

We've made a lot of changes to our business to help them sell more cars. One of the changes is we've asked our dealers to send us all their applications, and they're doing that, and that gives us more looks and more opportunity to manage towards risk-adjusted return and to be disciplined on the asset side of the balance sheet in terms of pricing. Similarly, when you look at the deposit side, we've made real investments in our deposit platform, providing a digital experience that's second to none, a nationally recognized brand that resonates with our customers, a long track record built on trust and doing things the right way for our customers, and that's paid dividends for us in terms of 7% year-on-year growth in customer accounts in the first half of this year, and it's something that we expect to continue building upon.