Ally Financial Inc.

Good day and thank you for standing by. Welcome to the Ally Financial first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sean Leary, Head of Investor Relations. Please go ahead.

Thank you, Elizabeth. Good morning and welcome to Ally Financial's first quarter 2025 earnings call. This morning, our CEO, Michael Rhodes, and our CFO, Russ Hutchinson, will review Ally's results before taking questions. The presentation we'll reference 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. Gap and non-gap measures pertaining to our operating performance and capital results are on slides three and four. As a reminder, non-gap or core metrics are supplemental to and not a substitute for U.S. gap measures. Definitions and reconciliations can be found in the appendix. And with that, I'll turn the call over to Michael.

Thank you, Sean. Good morning, everyone, and thank you for joining the call. Before diving into the details of our first quarter performance, I'd like to take a moment to share a few key perspectives about our path forward. As I approached my one-year anniversary as CEO of Ally, I could not be more energized about our future. Since day one, my focus has been keeping culture at the core of everything we do, ensuring that we have the right talent to propel us forward, shaping our strategy for the future, and aligning our people around that strategy while delivering results through strong execution. As I reflect on these past 12 months, a few things have become clear. First, do it right is not just a catchphrase. It's embedded in our culture, creating a meaningful and direct impact on everything we do. This April, Fortune magazine again recognized us as one of the best 100 companies to work for. While awards are not our goal, this latest acknowledgement reinforced the culture of allies unique. I am humbled by the feedback. 90% of our colleagues believe that Ally is a great place to work, over 30 percentage points higher than the US average. I've seen firsthand how results like this can materialize in tangible ways, including how we show up for our customers and the value it creates for shareholders. Over the past year, we have also strengthened and solidified our leadership team, identifying key talent, both internally and externally, is critical to ensure we are positioned to navigate challenges and seize opportunities. Another thing that's become clear to me is the competitive advantage created by the Ally brand. We've built a strong emotional connection to our customers, a connection rooted in a history of consistently doing things right. This commitment continues to set us apart, and we have seen clear evidence of our brand strength leading the way in our peer set. Our net promoter score is well ahead of the industry averages, and our positive brand social sentiment is nearly 90%, almost double our banking peers. This favorability reflects the trust and loyalty that our customers place in us, which is not something we take for granted. A key aspect of our success is a differentiated approach to building and maintaining the Ally brand. In fact, just last week, we proudly announced a multi-year partnership with the WNBA, establishing Ally as the official banking partner of the league. We have been at the center of the rapid rise of women's sports since the beginning, and this partnership underscores the power of our brand and our commitment. The final item that's become more apparent to me as I've settled into the CEO role is the importance of focus. We've talked a lot about how we're becoming a more focused company, to transform Ally into a stronger institution, one that is better positioned to compete and deliver compelling returns. This strategy is simplifying our organization, allowing us to prioritize resources to win in areas where we have demonstrated competitive advantage, deep relationships, and relevant scale. Our three core franchises, dealer financial services, corporate finance, and deposits, remain strong with tremendous runway ahead. We are committed to further investing in these businesses for sustainable growth and long-term success as we see meaningful opportunities for creative organic expansion. Coupled with discipline, expense, and capital management, we continue to see a clear path to attractive returns given the strength of these franchises. With this clarity of purpose and a commitment to our objectives, we are well positioned to execute and deliver meaningful shareholder value. During periods of macroeconomic uncertainty like we're in today, the power of focus is more critical as we allocate resources where we have deep expertise, strong relationships, and relevant scale to successfully navigate these challenges, including the impact of tariffs. With that context of the journey ahead, let's turn to page four to discuss our financial results. In the first quarter, Ally delivered adjusted earnings per share of 58 cents a core pre-tax income of $247 million, an adjusted net revenue of $2.1 billion, reflecting solid execution across each of our core businesses. Net interest margin for the quarter was 3.35%, up two basis points compared to the fourth quarter, in line with our expectations to start the year. As we shared in January, the full year trajectory of margin expansion will not follow a straight line on a quarter-to-quarter basis, However, we are confident in the direction. Russ will cover this in more detail later, but the takeaway is this. Our results within the quarter highlight the opportunities within our franchises, reinforce our market leading positions, and are in line with full year guidance we provided in January. Before discussing results, there are a few notable items from the quarter to highlight. First, our results reflect the transfer of our credit card business to held for sale at the end of the quarter. These impacts have been adjusted out of our core metrics for the period. The transaction successfully closed on April 1st, and we remain committed to ensuring a smooth transition for our colleagues and customers. I would like to take a moment to express my gratitude to our entire team and for CardWorks for getting this deal across the finish line. The sale of our credit card business has allowed us to further strengthen our balance sheet. As we previously disclosed, in March, we executed a repositioning transaction involving a portion of our available-for-sale portfolio. We complete a second, similar transaction later in the quarter. These strategic moves reduce interest rate risk and immediately increase net interest income. These outcomes reflect careful and prudent management of our exposure to rate risk, helping support the sustainability of our returns over time. As we said in January, we continue to be disciplined in how we manage capital, prioritizing investment in the business and eventually share repurchases. Let's turn to page five to discuss our market-leading franchises. Within our auto finance business, consumer originations of 10.2 billion were driven by 3.8 million applications, our highest quarterly application volume ever. Once again, underscoring the strength of our dealer relationships and the scale of our franchise. This scale enables us to be highly selective in the loans we book, optimizing both pricing and credit. I am encouraged by the trends we're seeing in application flow to further strengthen and grow our position as the leading bank auto finance lender in the country. Originated yields of 9.8% increased 17 basis points in the prior quarter. Notably, 44% originations were made up of our highest credit quality tier, which will continue to drive strong risk-adjusted returns for the years ahead. As we discussed, we expect our origination mix to shift over time, particularly from the fourth quarter when nearly half our originations were made up of our highest credit quality tier. Our ability to dynamically adjust price and risk appetite for emerging trends allows us to modify registration strategies for differing interest rate and credit environments. On the insurance side, written premiums of $385 million represent an increase of 9% year-over-year, as we've benefited from new relationships, growth in P&C exposure, and synergies within our auto finance team. Our insurance team now serves over 6,000 dealers in the United States and Canada. The average number of Ally F&I insurance products sold by each of our dealers has increased to 2.2. That's the highest since our IPO. On the P&C side, dealer inventory insurance exposure grew by 30% year-over-year. I'm very pleased with the growth for our business, and the alignment that we have between auto insurance only enhances the value proposition we offer to our dealer network. In corporate finance, we delivered another strong quarter with pre-tax income of $76 million and a 25% ROE. This business has consistently demonstrated resilience across economic cycles. The robust relationships we have with private equity sponsors and asset-based lenders has enabled us to grow the business at attractive returns while prudently managing risk. We again ended the quarter with zero net charge-offs demonstrating the quality of our loan book. As we have said, this is not a zero loss business and we expect some normalization. We see opportunities to drive prudent organic growth within our current verticals and are actively exploring new verticals to generate incremental accretive business. Turning to our digital bank, we continue to invest in delivering best in class digital experiences and products to grow customer value proposition beyond rate. In March, Fortune magazine again recognized us as one of the most innovative companies for 2025. This recognition is a testament to our culture, our relentless obsession with the customer and our ability to disrupt the industry. Related to our deposits franchise, we proudly serve a total of 3.3 million customers with balances reaching $146 billion at the end of the quarter. Balances were up nearly $3 billion quarter-over-quarter as we harvested seasonally higher levels of money in motion and continued to add customers. Like last year, we expect tax payments to result in lower deposits in the second quarter and are aiming for approximately flat balances for the full year, aligned with what's needed to support the asset side of our balance sheet. During the quarter, we saw strong flows from existing customers, This enabled us to move liquid savings rates down 20 basis points during the quarter, despite no move in the Fed Fund since December. Notably, 92% of our retail deposits are FDIC-insured, underscoring the strength and stability of our deposit base. Deposits represent nearly 90% of our funding profile, highlighting the 15-year evolution of the largest digital-only bank in the U.S. And with that, I'll turn it over to Russ.