Ally Financial Profiil
Ally Financial Inc. (Ally) operates as a financial-services company.
The company comprises the nation’s largest all-digital bank and an industry-leading automotive financing and insurance business. The company serves customers through a full range of online banking services (including deposits, mortgage lending, point-of-sale personal lending, and credit-card products) and securities brokerage and investment advisory services. The company also includes a corporate finance business that offers capital for equity sponsors and middle-market companies.
The company’s primary business lines are Dealer Financial Services, which is composed of its Automotive Finance and Insurance operations, Mortgage Finance, and Corporate Finance. Corporate and Other primarily consists of centralized corporate treasury activities, the management of the company’s legacy mortgage portfolio, the activity related to Ally Invest and Ally Lending, and reclassifications and eliminations between the reportable operating segments. Beginning in December 2021 with the acquisition of Fair Square (Fair Square Financial Holdings LLC and its subsidiaries, including Fair Square Financial LLC), which the company rebranded as Ally Credit Card, financial information for its credit-card business is included within Corporate and Other. Ally Bank’s assets and operating results are included within the company’s Automotive Finance, Mortgage Finance, and Corporate Finance segments, as well as Corporate and Other, based on its underlying business activities.
Within the company’s Automotive Finance and Insurance operations, the company focuses on strengthening its network of dealer relationships and pursuing digital distribution channels for the company’s products and services, including through its operation of a direct-lending platform and the company’s work with dealers innovating in digital transactions—all while maintaining an appropriate level of risk appetite. Within the company’s other banking operations, including Mortgage Finance and Corporate Finance, the company seeks to expand its consumer and commercial banking products and services while providing a high level of customer service.
Ally Lending primarily serves medical and home improvement service providers by enabling promotional and fixed rate installment-loan products through a digital application process at point-of-sale. At Ally Invest, the company seeks to augment its securities-brokerage and investment-advisory services to more comprehensively assist the company’s customers in managing their savings and wealth. Additionally, the company acquired Fair Square in December 2021, which provides the company with a scalable, digital-first credit card platform, and advances the company’s evolution as a leading digital consumer bank. Ally Credit Card features leading-edge technology, and a proprietary, analytics-based underwriting model. The addition of credit card to the company’s suite of products enhances its ability to grow and deepen both new and existing customer relationships.
Dealer Financial Services
Dealer Financial Services is composed of the company’s Automotive Finance and Insurance segments. The company’s primary customers are automotive dealers, which are independently owned businesses; and automotive retailers, such as Carvana, CarMax, and EchoPark. A dealer may sell or lease a vehicle for cash but, more typically, enters into a retail installment sales contract or operating lease with the customer and then sells the retail installment sales contract or the operating lease and the leased vehicle, as applicable, to Ally or another automotive-finance provider. The purchase by Ally or another provider is commonly described as indirect automotive lending to the customer.
The company’s Dealer Financial Services business is one of the largest full-service automotive finance operations in the country and offers a wide range of financial services and insurance products to automotive dealerships and their customers. The company’s automotive finance services include purchasing retail installment sales contracts and operating leases from dealers and automotive retailers, extending automotive loans directly to consumers, offering term loans to dealers, financing dealer floorplans and providing other lines of credit to dealers, supplying warehouse lines to automotive retailers, offering automotive-fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and supplying vehicle-remarketing services. The company also offers retail vehicle service contracts (VSCs) and commercial insurance primarily covering dealers’ vehicle inventories. The company is a leading provider of VSCs, GAP (guaranteed asset protection), and VMCs (vehicle maintenance contracts).
The company’s Automotive Finance operations provide the U.S.-based automotive financing services to consumers, automotive dealers and retailers, other businesses, and municipalities. The company’s business model, value-added products and services, full-spectrum financing, and business expertise proven over many credit cycles make the company a premier automotive finance company. For consumers, the company provides financing for new and used vehicles. In addition, the company’s CSG (Commercial Services Group) provides automotive financing for small businesses and municipalities.
The company, through its commercial automotive financing operations, funds the purchases of new and used vehicles through wholesale floorplan financing. The company manages commercial account servicing on approximately 2,600 dealers that utilize the company’s floorplan inventory lending or other commercial loans. The company serviced 87.6 billion consumer loan and operating leases as of December 31, 2022. The extensive infrastructure, technology, and analytics of the company’s servicing operations, as well as the experience of the company’s servicing personnel, enhance the company’s ability to manage the company’s loan losses and enable the company to deliver a favorable customer experience to both the company’s dealers and retail customers.
The company’s success as an automotive finance provider is driven by the consistent and broad range of products and services the company offers to dealers and automotive retailers. The company remains focused on meeting the needs of both the company’s dealer and consumer customers and continuing to strengthen and expand upon the company’s approximately 23,000 dealer relationships. The company continues to identify and cultivate relationships with automotive retailers, including those with leading eCommerce platforms. The company also operates an online direct-lending platform for consumers seeking direct financing.
Furthermore, the company’s strong and expansive dealer relationships, comprehensive suite of products and services, full-spectrum financing, and depth of experience position the company to evolve with future shifts in automobile technologies, including electrification. The company has provided and continues to provide automobile financing for hybrid and battery-electric vehicles, including brands, such as Jeep, Tesla, Ford, and BMW. This positions the company to remain a leader in automotive financing as the majority of these vehicles will be sold through dealerships and automotive retailers with whom the company has an established relationship.
The company has focused on developing dealer relationships beyond those relationships that primarily were developed through the company’s previous role as a captive finance company for GM and Stellantis. The company has established relationships with thousands of automotive dealers through the company’s customer-centric approach and specialized incentive programs designed to drive loyalty amongst dealers to the company’s products and services. The company’s Growth channel includes brands, such as Ford, Nissan, Kia, Hyundai, Toyota, Honda, as well as used-vehicle-only retailers with a national presence and online-only automotive retailers.
The company continues to focus on the consumer used-vehicle segment, primarily through franchised dealers and automotive retailers. This has resulted in used-vehicle financing volume growth, and has positioned the company as an industry leader in used-vehicle financing.
For consumers, the company provides automotive loan financing and leasing for approximately 4.3 million new and used vehicle contracts. Retail financing for the purchase of vehicles by individual consumers generally takes the form of installment sales financing. The company originated a total of approximately 1.3 million automotive loans and operating leases during the year ended December 31, 2022.
The company’s commercial automotive financing operations primarily fund inventory purchases of new and used vehicles by dealers, commonly referred to as wholesale floorplan financing. This represents the largest portion of the company’s commercial automotive financing business. Wholesale floorplan loans are secured by vehicles financed (and all other vehicle inventory), which provide strong collateral protection in the event of dealership default. Other commercial automotive lending products consist of automotive dealer revolving lines of credit, term loans, including those to finance dealership land and buildings, and dealer fleet financing. The company also provides comprehensive automotive remarketing services, including the use of SmartAuction, the company’s online auction platform, which efficiently supports dealer-to-dealer and other commercial wholesale vehicle transactions. SmartAuction provides diversified fee-based revenue and serves as a means of deepening relationships with the company’s dealership customers. In 2022, Ally and other parties, including dealers, fleet rental companies, and financial institutions, utilized SmartAuction to sell approximately 336,000 vehicles to dealers and other commercial customers. SmartAuction served as the remarketing channel for 9% of the company’s off-lease vehicles.
The company’s Insurance operations offer both consumer finance protection and insurance products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. The company serves approximately 2.5 million consumers nationwide across F&I (finance and insurance) and P&C (property and casualty) products. In addition, the company offers F&I products in Canada, where the company serves more than 400 thousand consumers and is the preferred VSC and other protection plan provider for GM Canada and VSC provider for Subaru Canada. Additionally, during the third quarter of 2022, the company entered into a long-term commitment to continue as the preferred VSC and other protection plan provider for GM Canada. As part of the company’s focus on offering dealers a broad range of consumer F&I products, the company offers VSCs, VMCs, and GAP products.
Ally Premier Protection is the company’s flagship VSC offering, which provides coverage for new and used vehicles of virtually all makes and models. The company also offers ClearGuard on the SmartAuction platform, which is a protection product designed to minimize the risk to dealers from arbitration claims for eligible vehicles sold at auction. The company also underwrites selected commercial insurance coverages, which primarily insure dealers’ wholesale vehicle inventory, and offer additional products to protect a dealer’s business, including property and liability coverage that is underwritten by a third-party carrier with a portion of the insurance risk assumed through a quota share agreement. On a smaller scale, the company also periodically assumes other insurance risks through quota share arrangements and performs services as an underwriting carrier for an insurance program managed by a third-party where the company cede the majority of such business to external reinsurance markets.
From a dealer perspective, Ally provides significant value and expertise, which creates high retention rates and strong relationships. In addition to the company’s product offerings, it provides consultative services and training to assist dealers in optimizing F&I results while achieving high levels of customer satisfaction and regulatory compliance. The company also advises dealers regarding necessary liability and physical damage coverages.
The company’s F&I products are primarily distributed indirectly through the automotive dealer network. The company has established approximately 1,500 F&I dealer relationships nationwide and 590 dealer relationships in Canada, with a focus on growing dealer relationships in the future. The company’s VSCs for retail customers offer owners and lessees mechanical repair protection and roadside assistance for new and used vehicles beyond the manufacturer’s new vehicle warranty. These VSCs are marketed to the public through automotive dealerships and on a direct response basis. The company also offers GAP products, which cover certain amounts owed by a customer beyond their covered vehicle’s value in the event the vehicle is damaged or stolen and declared a total loss. The company continues to evolve its product suite and digital capabilities to position the company’s business for future opportunities through growing third-party relationships and sales through the company’s online direct-lending platform.
The company has approximately 3,200 dealer relationships within its P&C business to whom the company offers a variety of commercial products and levels of coverage. Vehicle inventory insurance for dealers provides physical damage protection for dealers’ floorplan vehicles. Among dealers to whom the company provides wholesale financing, its insurance product penetration rate is approximately 76%.
The company’s Mortgage Finance operations consist of the management of held-for-investment and held-for-sale consumer mortgage loan portfolios. The company’s held-for-investment portfolio includes the company’s direct-to-consumer Ally Home mortgage offering, and bulk purchases of high-quality jumbo and LMI mortgage loans originated by third parties.
Through the company’s direct-to-consumer channel, it offers a variety of competitively priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third-party. Under the company’s arrangement, its direct-to-consumer conforming mortgages are originated as held-for-sale and sold, while jumbo and LMI mortgages are originated as held-for-investment and subserviced by a third party. Loans originated in the direct-to-consumer channel are sourced by existing Ally customer marketing, prospect marketing on third-party websites, and email or direct mail campaigns.
In April 2019, the company announced a strategic partnership with Better Mortgage Company (BMC), which delivers an enhanced end-to-end digital mortgage experience for the company’s customers through its direct-to-consumer channel. Through this partnership, BMC conducts the sales, processing, underwriting, and closing for Ally’s digital mortgage offerings in a highly innovative, scalable, and cost-efficient manner, while Ally retains control of all the marketing and advertising strategies and loan pricing. This partnership with BMC limits operational volatility as the mortgage industry continues to evolve in the current interest rate environment.
Through the bulk loan channel, the company purchases loans from several qualified sellers, including direct originators and large aggregators who have the financial capacity to support strong representations and warranties and the industry knowledge and experience to originate high-quality assets. Bulk purchases are made on a servicing-released basis, allowing the company to directly oversee servicing activities and manage refinancing through the company’s direct-to-consumer channel. The company’s mortgage loan purchases are held-for-investment.
The company’s Corporate Finance operations primarily offer senior-secured loans to private equity sponsor-owned U.S.-based middle-market companies and to well-established asset managers that mostly provide leveraged loans. The portfolio is composed of floating-rate leveraged asset-based and cash flow/enterprise value loans. The company’s corporate-finance lending portfolio is generally composed of first-lien, first-out loans.
The company’s Sponsor Finance business focuses on companies owned by private-equity sponsors with loans typically used for leveraged buyouts, refinancing and recapitalizations, mergers and acquisitions, growth, turnarounds, and debtor-in-possession financings. Additionally, the company’s Lender Finance business provides asset managers with facilities to partially fund their direct-lending activities. The company also provides a commercial real estate product, focused on lending to skilled nursing facilities, senior housing, and medical office buildings. Sponsor Finance loan facilities typically include both a revolver and term loan component.
The company also selectively arranges larger transactions that the company may retain on-balance sheet or syndicate to other lenders. By syndicating loans to other lenders, the company is able to provide financing commitments in excess of its target hold levels to the company’s customers and generate loan syndication fee income while reducing the company’s risk exposure to individual borrowers. All the company’s loans are floating-rate facilities with maturities typically ranging from two to seven years. In certain instances, the company may be offered the opportunity to make small equity investments in its borrowers, which provides an additional revenue opportunity for the company’s business. The portfolio is well diversified across multiple industries, including financials, services, manufacturing distribution, and other specialty sectors. These specialty sectors include technology/venture finance, defense and aerospace, and transportation and logistics. Other smaller complementary product offerings that help strengthen the company’s reputation as a full-spectrum provider of financing solutions for borrowers include issuing letters of credit through Ally Bank and selectively offering second-out loans on certain transactions.
Corporate and Other
Corporate and Other primarily consists of centralized corporate treasury activities, such as management of the cash and corporate investment securities and loan portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, original issue discount, and the residual impacts of the company’s corporate FTP (funds-transfer pricing) and treasury ALM (asset liability management) activities. Corporate and Other also includes activity related to certain equity investments, which primarily consist of FHLB and FRB stock, as well as other equity investments through Ally Ventures, the company’s strategic investment business. Additionally, Corporate and Other includes the management of the company’s legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, CRA loans and related investments, and reclassifications and eliminations between the reportable operating segments.
Corporate and Other includes the results of Ally Invest, the company’s digital brokerage and wealth management offering, which enables the company to complement its competitive deposit products with low-cost investing. The digital wealth management business aligns with the company’s strategy to create a premier digital financial services company and provides additional sources of fee income through asset management and certain other fees, with minimal balance sheet utilization. This business also provides an additional source of low-cost deposits through arrangements with Ally Invest’s clearing broker.
Through Ally Invest, the company is able to offer a broad array of products through a fully integrated digital consumer platform centered around self-directed products and digital advisory services. Ally Invest’s suite of commission-free and low-cost investing options serve both active and passive investors with diverse and evolving financial objectives through a transparent online process. The company’s digital platform and broad product offerings are enhanced by outstanding client-focused and user-friendly customer service that is generally accessible twenty-four hours a day, seven days a week, via the phone, web or email—consistent with the Ally brand.
Ally Invest provides clients with self-directed trading services for a variety of securities, including stocks, options, ETFs, mutual funds, and fixed-income products through Ally Invest Securities. Ally Invest Securities also offers margin lending, which allows customers to borrow money by using securities and cash held in their accounts as collateral. Through Ally Invest Forex, the company offers self-directed investors and traders the ability to trade over 50 currency pairs through a forex trading platform.
Ally Invest also provides advisory services to clients through wealth advisors, web-based solutions, informational resources, and virtual interaction through Ally Invest Advisors, an SEC-registered investment advisor. Ally Invest Advisors provides clients the opportunity to obtain professional portfolio management services in return for a fee based upon the client’s assets under management. In addition to customized advice from wealth advisors, the company offers cash enhanced portfolios that incur no management fee, and a number of core robo portfolios, which hold ETFs diversified across asset class, industry sector, and geography and which are customized for clients based on risk tolerance, investment time horizon, and wealth ratio.
Ally Lending is also included within Corporate and Other and primarily serves medical and home improvement service providers by enabling promotional and fixed rate installment-loan products through a digital application process at point-of-sale. Point-of-sale lending broadens the company’s capabilities, and expands the company’s product offering into consumer unsecured lending, all while helping to further meet the financial needs of its customers.
Ally Credit Card
Beginning in December 2021 with the acquisition of Fair Square, which the company rebranded as Ally Credit Card, financial information for the company’s credit-card business is included within Corporate and Other. The acquisition provides the company with a scalable, digital-first credit card platform, and advances the company’s evolution as a leading digital consumer bank. Ally Credit Card features leading-edge technology, and a proprietary, analytics-based underwriting model. As of December 31, 2022, the company’s credit card business had approximately 1.0 million customers.
The company focuses on growing and retaining a stable deposit base and deepening relationships with the company’s 2.7 million primary deposit customers by leveraging the company’s compelling brand and strong value proposition. Ally Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers. Ally Bank is the largest online only bank as measured by retail deposit balances.
The company’s deposit products and services are designed to develop long-term customer relationships and capitalize on the shift in consumer preference for direct banking. The company’s deposits franchise is key to growing and building momentum across the company’s suite of digital offerings at Ally Home, Ally Invest, Ally Lending, and Ally Credit Card.
Ally Bank offers a full spectrum of retail deposit products, including online savings accounts, money-market demand accounts, CDs, interest-bearing checking accounts, trust accounts, and IRAs (individual retirement accounts). The company’s deposit services include Zelle person-to-person payment services, eCheck remote deposit capture, and mobile banking. As demonstrated with the successful launch of the company’s Smart Savings Tools, Ally continues to deliver innovative digital tools on top of traditional financial products to add incremental value to customers, while also driving increased engagement and loyalty. Over 650,000 customers have adopted the company’s Smart Savings Tools.
The company had 2.7 million deposit customers and 5.0 million retail bank accounts as of December 31, 2022. The company is focused on growing, deepening, and further leveraging the customer relationships and brand loyalty that exist with Ally Bank as a catalyst for future loan and deposit growth, as well as revenue opportunities that arise from introducing Ally Bank deposit customers to the company’s digital wealth management offering, Ally Invest.
The company’s strategy and approach to extending credit, as well as its management of credit risk, are critical elements of its business.
As of December 31, 2022, the company’s securities portfolio included debt securities, such as the U.S. treasury and federal agencies; the U.S. states and political subdivisions; agency mortgage-backed residential securities; mortgage-backed residential securities; agency mortgage-backed commercial securities; and asset-backed securities.
Regulation and Supervision
Ally and IB Finance (IB Finance Holding Company, LLC), a Delaware limited liability company, are BHCs (bank holding companies) under the Bank Holding Company Act of 1956, as amended (BHC Act), and Ally has elected to be an FHC (financial holding company) under the GLB Act (Gramm-Leach-Bliley Act of 1999, as amended). IB Finance is a direct subsidiary of Ally and the direct parent of Ally Bank, which is a commercial bank that is organized under the laws of the state of Utah and whose deposits are insured by the FDIC (Federal Deposit Insurance Corporation) under the FDI Act (Federal Deposit Insurance Act, as amended). As BHCs, Ally and IB Finance are subject to regulation, supervision, and examination by the FRB. Ally Bank is a member of the Federal Reserve System and is subject to regulation, supervision, and examination by the FRB (Federal Reserve Bank, or Board of Governors of the Federal Reserve System, as the context requires), the UDFI (Utah Department of Financial Institutions), the FDIC, and the CFPB (Consumer Financial Protection Bureau).
The company is also subject to direct supervision and periodic examinations by various governmental agencies and industry SROs that are charged with overseeing the kinds of business activities in which it engages, including the FRB, the UDFI, the FDIC, the CFPB, the SEC, FINRA (Financial Industry Regulatory Authority), and a number of state regulatory and licensing authorities, such as the NYDFS (New York Department of Financial Services).
Ally is subject to enhanced prudential standards that have been established by the FRB under the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended), as amended by the EGRRCP Act (Economic Growth, Regulatory Relief, and Consumer Protection Act, as amended) and as applied to Category IV firms under rules of the U.S. banking agencies that tailor how the enhanced prudential standards apply across large banking organizations (the Tailoring Rules).
Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W prevent Ally and its nonbank subsidiaries from taking undue advantage of the benefits afforded to Ally Bank as a depository institution, including its access to federal deposit insurance and the FRB’s discount window.
Ally Bank is an insured depository institution and, as such, is required to file periodic reports with the FDIC about its financial condition.
Ally Bank’s deposits are insured by the FDIC in the standard insurance amounts per depositor for each account ownership category as prescribed by the FDI Act.
Ally Invest Securities LLC (Ally Invest Securities) is registered as a securities broker-dealer with the SEC and in all 50 states, the District of Columbia, and Puerto Rico, is registered with the Municipal Securities Rulemaking Board as a municipal securities broker-dealer, and is a member of FINRA and SIPC (Securities Investor Protection Corporation). As a result, Ally Invest Securities and its personnel are subject to extensive requirements under the Exchange Act, SEC regulations, SRO rules, and state laws, which collectively cover all aspects of the firm’s securities activities—including sales and trading practices, capital adequacy, recordkeeping, privacy, anti-money laundering, financial and other reporting, supervision, misuse of material nonpublic information, conduct of its business in accordance with just and equitable principles of trade, and personnel qualifications.
Ally Invest Forex LLC (Ally Invest Forex) is registered with the CFTC as an introducing broker and is a member of the NFA, which is the primary SRO for the U.S. futures industry. The firm is subject to similarly expansive requirements under the Commodity Exchange Act, CFTC and NFA rules governing introducing brokers and their personnel, and CFTC retail forex rules.
Ally Invest Advisors Inc. (Ally Invest Advisors) is registered as an investment adviser with the SEC. As a result, the firm is subject to a host of requirements governing investment advisers and their personnel under the Investment Advisers Act of 1940, as amended, and related rules and regulations, including certain fiduciary and other obligations with respect to its relationships with its investment advisory clients.
Some of the other more significant laws to which the company is subject include the GLB Act and related regulations; Section 13 of the BHC Act and its implementing regulations (commonly referred to as the Volcker Rule); the Equal Credit Opportunity Act, the Fair Housing Act, and similar fair-lending laws (collectively, Fair Lending Laws); the Fair Credit Reporting Act; the Truth in Lending Act (TILA) and Regulation Z; the Bank Secrecy Act, as amended by the USA PATRIOT Act; the Community Reinvestment Act; and the Adjustable Interest Rate Act (the LIBOR Act).
Ally Financial Inc. was founded in 1919. The company was incorporated in 1997.