Ally Financial Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the LR Financial First Quarter 2022 Earnings Conference Call. At this time, all participants are on the listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star, then the one key on your touched-on telephone. Please be advised that today's conference is being recorded. If you require operating assistance at any time, please press star, then zero. I would now like to hand the conference over to your speaker host today, Mr. Sean Leary, Head of Investor Relations. Please go ahead.

Thank you, Olivia. Good morning and welcome to Ally Financial's first quarter 2022 earnings call. This morning, our CEO, Jeff Brown, and our CFO, Jen LeClaire, will review Ally's results before taking questions. The presentation we'll reference on today's call can be found on the Investor Relations section of our website, ally.com. Forward-looking statements and risk factor language governing today's call are on slide two. GAAP and non-GAAP measures pertaining to our operating performance and capital results are on slide three. As a reminder, non-GAAP or core metrics are supplemental to and not a substitute for U.S. GAAP measures. Definitions and reconciliations can be found in the appendix. And with that, I'll turn the call over to JB.

Thank you, Sean, and welcome to your first earnings call and your expanded role as the head of investor relations. I've worked directly with Sean for over 13 years at Ally, and he will be a terrific liaison with the analyst investor community. He's a great asset for our company, and welcome to the role, Sean. We do appreciate everyone joining us this morning to review our first quarter results. I'm going to begin on slide number four. Performance this quarter remained very strong, and our results underscore the scale and durability of our growing businesses. We've been operating in a rapidly evolving environment for several years now, and the start to 2022 certainly continues that trend. In addition to lingering pandemic uncertainties, geopolitical unrest and more pronounced signs of inflation are being met with rising interest rates and the expected normalization of the Federal Reserve balance sheet. Before getting into our results, I also want to acknowledge and express our deep empathy for those impacted by the war in Ukraine. The stories and images are tragic, and our thoughts are with all of those suffering through this terrible humanitarian crisis. We are certainly hopeful for a rapid resolution, but recognize that ramifications could be long-lasting. This operating environment has driven market volatility that will continue in the near term. However, I remain confident in Ally's outlook given the strength of our businesses and consistent focus on disciplined long-term execution. The U.S. consumer remains healthy with historically low debt servicing levels, significantly elevated household savings, in a tight labor market that's coming with strong wage growth. These trends are driving increased consumer spending reflected in robust originations, pricing, and loan growth across Ally. Our industry-leading auto and insurance businesses have deep, mutually beneficial relationships with their dealer customers and have proven ability to drive growth and significant value through multiple economic cycles. Across Ally Bank, we continue to see solid customer momentum and engagement. The integration of Fair Square, now Ally Credit Card, our newest bank capability, remains on schedule and the business delivered a great first quarter. we remain confident in the differentiated value proposition provided by all of our digital consumer banking businesses and expect meaningful accretive growth over the next several years. Ally's success has always been defined by our relentless customer focus and the strength of our culture. Our deliberate actions for all stakeholders remain rooted in our do-it-right philosophy. In January, we announced our new cover draft capability, which provides Ally checking account customers protection against accidental overdrafts at no cost. This follows our announcement to fully eliminate overdraft fees in 2021, the first in the industry, and a testament to our commitment to delivering a customer-centric banking experience. It has been great to see other banks follow as well. In February, we hosted our second annual Supplier Diversity and Sustainability Symposium, created to build and expand relationships with minority-owned businesses. And we're well underway with the celebration of Financial Literacy Month in April, a key part of our continuous efforts to support economic mobility across our communities. I'm proud of our nearly 11,000 allied teammates for their relentless execution and living our values in meaningful ways every day. Let's turn to slide number five, where I'll touch on a few highlights from 1Q. First quarter adjusted EPS of $2.03, core ROTC of 23.6%, and revenues of $2.2 billion reflected continued momentum and a great start to the year across our diversified platforms. The backdrop across consumer and auto markets remains strong during the quarter, and we are well positioned to sustain robust operating and financial results this year and beyond. This positioning reflects years of disciplined execution of building adaptable platforms that will allow us to grow and capitalize on market opportunities in a wide variety of operating environments. More specifically, we remain confident and our long-term outlook for a sustainable ROTCE profile of 16% to 18% plus, with the potential for outperformance in 2022 as the environment normalizes. Our earnings trajectory has positioned us to execute the $2 billion buyback program for the second consecutive year, and yesterday we announced our second quarter dividend of of 30 cents per share, up nearly 60% from a year ago. Our nimble, customer-centric businesses provide us the ability to capitalize on emerging trends evident in our results across the past several years and in our sustainable outlook. Within auto, consumer originations of $11.6 billion represented our highest first quarter in 11 years, sourced from 3.2 million decision applications with originated yields once again exceeding 7%. Despite low levels of inventory and new unit sales, consumer originations were up 14% year over year, demonstrating the agility and scale of our auto business, allowing us to consistently generate volume and attractive risk-adjusted returns. Credit normalization through the first quarter has been in line with expectations, and retail NCOs of 58 basis points remain well below pre-pandemic levels. We continue monitoring broader market indicators of consumer health, including wage and price inflation, employment conditions, and overall payment trends. While the current inflationary environment will add some pressure to households and consumers are generally well positioned with healthy balance sheets. And as you've heard from us before, we've made significant investments in our ability to engage our auto customers through expanded digital channels coupled with enhanced analytics within our servicing teams. From an industry production perspective, we're still seeing low levels of inventory driven by persistent supply chain challenges and strong consumer demand. These dynamics continue to result in lower floor plan balances and structural support for used originations and values. We saw modest normalization in the first quarter, but expect floor plan balances to remain low for quite some time. Within insurance, written premiums of $265 million reflected lower overall inventory levels. Investment portfolio performance remained strong while weather claims benefited from lower exposure. Turning to Ally Bank, organic and accelerating growth trends continued. Retail deposit customers now exceed 2.5 million, expanding 8% year-over-year and representing our 52nd consecutive quarter of growth. Retail balances grew to $136 billion, and account for nearly 90% of our funding profile. Our consumer engagement and product adoption trends remain robust. Ally Home originated $1.7 billion in the quarter, despite the headwind from higher mortgage rates and slowing refinance volume. Ally Invest customer assets grew to $16.8 billion, a 10% year-over-year increase, while accounts expanded 7%. and Ally lending volume of $442 million, more than doubled year over year, as we expanded merchant relationships and volume in the healthcare and home improvement verticals. Ally credit cards surpassed $1 billion in loan balances in the quarter and now has over 800,000 active cardholders, up 73% from prior year, I was in Wilmington about a week ago with our new teammates, and we celebrated 1 million account openings, nice milestones for this business. Corporate Finance posted another steady and solid quarter with the held for investment portfolio exceeding 8 million and credit performance remaining very strong. Performance across our businesses reinforces our broad customer reach, adaptable platforms, years of disciplined execution, and ability to meet our financial and operational goals. I remain incredibly proud of all of our teammates and highly confident in their ability to continue to execute in a rapidly changing environment. And with that, Jen, over to you.