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    ALLY
    Earnings call· Jun 2026(Q2 FY26)

    Ally Financial Inc. ALLY

    Jul 21, 2026 Source

    Executive summary

    Ally Financial Q2 FY26 — Strong Growth and Margin Expansion Drive Earnings Beat

    Ally Financial delivered a solid second quarter, showcasing significant margin expansion and robust asset growth in core portfolios, leading to a 22% year-over-year increase in adjusted EPS. The company's strategic focus on high-returning assets and disciplined expense management is driving positive operating leverage and enhanced capital flexibility. Management remains confident in its path to sustainable upper 3s NIM and continued shareholder returns, while maintaining a measured approach to credit given the dynamic macroeconomic environment.

    Highlights

    5

    • Adjusted EPS of $1.21, up 22% year-over-year.

    • Adjusted net revenue of $2.3 billion, increased 10% year-over-year.

    • Net interest margin (NIM) improved 11 basis points sequentially to 3.63%.

    • Retail auto and corporate finance assets grew nearly $8 billion, up 8% year-over-year.

    • Auto Finance originations reached $13.3 billion, up 21% year-over-year, with record applications of $4.6 million.

    Concerns

    3

    • Provision expense of $430 million, up $46 million year-over-year, primarily due to CECL reserve builds from strong asset growth.

    • Retail deposit balances decreased $2.6 billion during the quarter due to seasonal tax outflows.

    • 30-plus all-in delinquencies of 4.8% remain a watch item, despite year-over-year improvement in NCOs.

    Guidance & targets

    7
    CategoryTargetConfidence
    Average earning assets growth
    up 3% to 5%
    high materiality
    High
    Consolidated Net Charge-Offs (NCOs)
    1.2% to 1.3%
    high materiality
    High
    Retail Auto Net Charge-Offs (NCOs)
    1.8% to 2.0%
    high materiality
    High
    Net Interest Margin (NIM)
    3.6% to 3.7%
    high materiality
    High
    Net Interest Margin (NIM) trajectory
    sustainable upper 3s margin
    high materiality
    High
    S-Tier mix in originations
    low to mid-40s
    medium materiality
    Medium
    Retail Auto Origination growth rates
    moderate in the back half of the year
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Dealer Financial Services - Auto Finance
    Record application volume and strong origination growth, reflecting a strong value proposition and strategic initiatives with dealers. Origination mix influenced by seasonal dynamics and a measured approach to the operating environment.
    Applications: 4.6 millionApplications growth YoY: 17%Originations: $13.3 billionOriginations growth YoY: 21%Retail origination yield: 9.1%S-Tier originations: 47%
    		————
    Dealer Financial Services - Insurance
    Solid quarter with increased written premiums, driving capital-efficient, diversified revenue. Continues to leverage synergies with auto finance to deepen dealer relationships.
    Written premiums: $382 millionWritten premiums growth YoY: 9%Insurance losses: $208 millionInsurance losses growth YoY: 2.5%
    		$382 million9%—$24 million pretax income
    Corporate Finance
    Delivered record pretax earnings and strong portfolio growth, built on long-standing client relationships and deep underwriting expertise. Credit discipline underpins every decision, resulting in exceptionally strong credit performance.
    Portfolio balance: $13.7 billionPortfolio growth YoY: 25%Return on equity (ROE): 32%Nonaccrual loans: Historic lows
    		———Record pretax earnings
    Digital Bank
    Strong customer growth and engagement trends, with deposits providing a stable and cost-efficient funding source. Significant growth from younger, digitally engaged consumers.
    Retail deposit balances: $144 billionDeposits as % of total funding: 87%Customer count: 3.6 millionCustomer growth YoY: 7%Consecutive quarters of customer growth: 69New accounts from millennials and younger consumers: Nearly 70%Average balance for new accounts: Just under $10,000
    		————

    Operational metrics

    30
    Adjusted EPS
    $1.21up 22% YoY
    Q2 FY26

    Reflects solid second quarter results and progress in building a more focused, higher performing company.

    Core ROTC
    11.8%
    Q2 FY26

    Increased during the quarter, reflecting improved earnings power.

    Adjusted net revenue
    $2.3 billionup 10% YoY
    Q2 FY26

    Reflecting continued asset growth and further margin expansion.

    Retail auto and corporate finance assets growth
    $8 billionup 8% YoY
    Q2 FY26

    Concentrated in highest returning assets.

    CET1 increase
    20 bpsYoY
    Q2 FY26

    Balance sheet continued to strengthen, providing greater capital flexibility.

    Share repurchases
    $300 million
    YTD

    Returned to shareholders since announcing authorization in December.

    Net financing revenue, excluding OID
    $1.7 billionup 11% YoY
    Q2 FY26

    Supported by balance sheet growth in core portfolios and lower funding costs.

    Adjusted other revenue
    $573 millionup $42 million YoY
    Q2 FY26

    Momentum across diversified revenue streams, including insurance, smart auction, and pass-through programs.

    Provision expense
    $430 millionup $46 million YoY
    Q2 FY26

    CECL reserve builds associated with strong asset growth more than offset improvement in retail auto net charge-offs.

    Provision expense from origination growth
    $30 million
    Q2 FY26

    Driven by retail origination momentum finishing nearly $1 billion higher than initial expectations.

    Adjusted noninterest expense
    $1.3 billionup 5% YoY
    Q2 FY26

    In line with expectations, contributing to strong positive operating leverage.

    Preferred stock early redemption expense
    $15 million
    Q2 FY26

    One-time charge related to the early redemption of Series B preferred stock, excluded from adjusted results.

    Cost of funds decrease
    12 bpsQoQ
    Q2 FY26

    Driven by disciplined deposit pricing actions through Q1 and Q2.

    Retail deposit balances decrease
    $2.6 billionQoQ
    Q2 FY26

    Driven by seasonal tax outflows, in line with normal seasonality.

    Liquid deposit pricing reduction
    20 bps
    Q2 FY26

    Contributed to lower cost of funds.

    Cumulative liquid deposit beta
    69%
    Q2 FY26

    Achieved through disciplined deposit pricing.

    CET1 under current RSA proposal (fully phased-in AOCI)
    above 9%
    Future

    Management target for a number of years, positions the company well.

    Erba benefit to CET1
    3 bps
    Future

    Additional benefit under current RSA proposal.

    Credit risk transfer transaction CET1 impact
    20 bps
    Q2 FY26

    Fifth transaction, reflecting continued demand for retail auto assets and efficient capital management.

    Preferred stock issuance
    $1 billion
    Q2 FY26

    Proceeds used to support redemption of Series B preferred stock.

    Preferred stock outstanding decline
    $350 million
    Q2 FY26

    Resulted from the preferred stock issuance and redemption, with favorable economics.

    Share repurchases executed
    $148 million
    Q2 FY26

    Part of capital return strategy.

    Quarterly dividend
    $0.30consistent with prior quarter
    Q3 FY26

    Announced for the third quarter of 2026.

    Adjusted tangible book value per share
    $42up 13% YoY
    Q2 FY26

    Underscores focus on delivering strong shareholder value.

    Consolidated net charge-offs (NCOs)
    111 bpsdown 10 bps QoQ, roughly flat YoY
    Q2 FY26

    Included resolution of a corporate finance exposure with a P&L benefit.

    Retail auto net charge-offs (NCOs)
    157 bpsdown 40 bps QoQ, down 18 bps YoY
    Q2 FY26

    Marking a sixth consecutive quarter of year-over-year improvement.

    30-plus all-in delinquencies
    4.8%down 8 bps YoY
    Q2 FY26

    Year-over-year improvement continues to moderate as expected, remains a watch item.

    Consolidated coverage rate
    2.49%down QoQ
    Q2 FY26

    Driven by specific reserve release in Corporate Finance.

    Retail auto coverage rate
    3.75%flat QoQ
    Q2 FY26

    Balances consistent credit trends with broader macroeconomic uncertainty.

    Originated yield (Q2)
    9.1%down 50 bps QoQ
    Q2 FY26

    Impacted by higher S-Tier mix, partially offset by increased pricing on like-for-like segments.

    Industry KPIs

    11
    MetricValueDetails
    Fee revenue$573 millionUSD
    Funding mix87%%
    Delinquencies4.8%%
    Capital returns$148 millionUSD
    Credit quality mix47%%
    Net charge off rate111 bpsbps
    Loans card receivables$13.7 billionUSD
    Provision reserve rate2.49%%
    New accounts card acquisitions3.6 millioncustomers
    Billed business purchase volume$13.3 billionUSD
    Net interest margin yield on receivables3.63%%

    Risks & headwinds

    5
    Cumulative headwinds from inflationary pressures and evolving macro backdropOngoing

    Unquantified

    Mitigation: Measured approach to navigating the operating environment, dynamic underwriting, servicing, and collections.

    Elevated CECL reserve buildFY26

    $30 million additional build in Q2 FY26

    Mitigation: Result of strong accretive asset growth, which will drive higher earnings over time.

    Macroeconomic uncertainty and evolving interest rate expectations (rate hikes)Short-term

    Unquantified impact on NIM path

    Mitigation: Confident in ability to deliver on full-year NIM guide; long-term NIM destination remains unchanged.

    Stubbornly high delinquenciesOngoing

    30-plus all-in delinquencies of 4.8%

    Mitigation: Closely monitored along with used values and flow-to-loss rates; confident in credit quality and dynamic underwriting.

    Consumer affordability challengesOngoing

    Unquantified

    Mitigation: Consumers are triaging monthly payments, leading to higher delinquencies but stable total loss rates.

    What to watch in Q3 FY26

    5

    Retail Auto NCOs

    Next quarter / H2 FY26
    Current157 bps
    TargetMidpoint of 1.8%-2.0% FY26 guide

    Why it matters

    Tracking the trajectory of retail auto credit performance against management's full-year expectations, especially given moderating delinquency improvement.

    Reflected within the guide for consolidated NCOs is our outlook for retail auto. As I mentioned previously🔁, we're pleased with the credit performance through the first half of the year, and view the midpoint of our retail NCO guide as appropriate.

    Q&A highlights

    5

    How do the better-than-expected NCOs, leveling delinquencies, and elevated S-Tier volume reconcile with the full-year NCO guide and the longer-term 1.6%-1.8% loss rate target?

    Management is pleased with H1 credit performance, especially record low flow-to-loss rates and used vehicle price support, despite stubbornly high delinquencies. They maintain the 1.8%-2.0% NCO guide, centering on the midpoint. The longer-term 1.6%-1.8% NCO rate is a multi-vintage target without a specific timeline. The elevated S-Tier mix in Q2 is attributed to seasonality and a measured credit posture, not a long-term trend, and is expected to normalize to low to mid-40s over time.

    “Overall, I'd say we still see this macro as dynamic and obviously taking a measured posture in response to that. All that being said, we're pleased with the credit performance in the first half of the year. And we're holding our guide at 1.8% to 2%, as you pointed out, we continue to think the midpoint of that range is an appropriate state case to center around.”

    asked by Robert Wildhack · answered by Russell Hutchinson

    3 min read6 chapters

    Detailed Narrative

    01

    Strategic Execution and Financial Performance

    Ally Financial's Q2 FY26 results demonstrate the effectiveness of its strategic choices, leading to margin expansion and strong operating performance. The company reported adjusted EPS of $1.21, a 22% year-over-year increase, and core ROTC rose to 11.8%. Adjusted net revenue grew 10% year-over-year to $2.3 billion, driven by continued asset growth in retail auto and corporate finance, which collectively increased 8% year-over-year. This performance underscores a fundamentally stronger Ally, well-positioned for enhanced profitability and resilience through economic cycles.

    02

    Dealer Financial Services Momentum

    The Dealer Financial Services segment showed significant momentum, with Auto Finance applications reaching a record 4.6 million, up 17% year-over-year. This strong application volume fueled $13.3 billion in originations, a 21% year-over-year increase, while maintaining consistent approval and pull-through rates. The retail origination yield was 9.1%, with 47% S-Tier volume, reflecting seasonal dynamics and a measured credit approach. The Insurance business also contributed positively with written premiums of $382 million, up 9% year-over-year, deepening dealer relationships.

    03

    Corporate Finance Strength and Credit Discipline

    Corporate Finance delivered record pretax earnings and a 32% return on equity, with its portfolio growing 25% year-over-year to $13.7 billion. The segment's success is attributed to strong client demand, deep underwriting expertise, and a commitment to credit discipline. Nonaccrual loans are at historic lows, showcasing the durability of the franchise and its effective risk management framework. The resolution of a legacy healthcare loan, which had been in nonaccrual since 2018, resulted in a P&L benefit due to conservative reserving.

    04

    Digital Bank Customer Growth and Funding Stability

    Ally's Digital Bank continued its strong customer growth trend, serving 3.6 million customers, up 7% year-over-year, marking the 69th consecutive quarter of growth. Retail deposit balances stood at $144 billion, representing 87% of total funding, providing a stable and cost-efficient funding source. The company noted that nearly 70% of new accounts come from younger consumers, typically starting with average balances just under $10,000 and growing over time⏳, highlighting the appeal of Ally's digital-first platform.

    05

    Net Interest Margin Expansion and Deposit Dynamics

    Net interest margin, excluding OID, expanded by 11 basis points sequentially to 3.63%, primarily driven by lower deposit costs. The cost of funds decreased 12 basis points quarter-over-quarter due to disciplined deposit pricing actions, including a 20 basis point reduction in liquid deposit pricing, achieving a cumulative liquid deposit beta of 69%. While retail deposit balances saw a seasonal decrease of $2.6 billion, the company maintains access to diverse funding sources and expects continued NIM expansion from accretive asset growth and efficient funding.

    06

    Capital Management and Asset Quality

    CET1 increased 20 basis points year-over-year to 10.1%, demonstrating balance sheet strength and greater capital flexibility. The company executed $148 million in share repurchases during the quarter and maintained its quarterly dividend of $0.30. Consolidated net charge-offs were 111 basis points, down 10 basis points sequentially, with retail auto NCOs at 157 basis points, marking a sixth consecutive quarter of year-over-year improvement. The consolidated coverage rate was 2.49%, with retail auto coverage flat at 3.75%, balancing credit trends with macroeconomic uncertainty🌐.

    AI-generated summary of the company’s earnings call. Not investment advice.