Ally Financial Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the figures below are primarily full-year results and year-end balances, not standalone fourth-quarter results. Ally is a digital bank and financial-services company, with major automotive finance and insurance operations, alongside mortgage, corporate finance, brokerage, point-of-sale lending, and credit-card businesses.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total net revenue | $8.43 billion | $8.21 billion |
| Net financing revenue and other interest income | $6.85 billion | $6.17 billion |
| Provision for credit losses | $1.40 billion | $241 million |
| Noninterest expense | $4.69 billion | $4.11 billion |
| Net income from continuing operations | $1.72 billion | $3.07 billion |
| Diluted EPS from continuing operations | $5.04 | $8.24 |
| Net interest margin | 3.85% | 3.54% |
| Return on average assets / equity | 0.93% / 11.91% | 1.70% / 18.31% |
| Net cash provided by operating activities | $6.25 billion | $4.04 billion |
| Total assets | $191.8 billion | $182.1 billion |
| Deposits | $152.3 billion | $141.6 billion |
| Total available liquidity | $27.3 billion | $31.2 billion |
At year-end, finance receivables and loans totaled $135.7 billion before the $3.7 billion allowance for loan losses. Balance-sheet debt was $20.2 billion, including $2.4 billion of short-term borrowings and $17.8 billion of long-term debt. Ally’s Common Equity Tier 1 ratio was 9.27%, down from 10.34%; its stress capital buffer requirement was 2.5%. Ally Bank met the regulatory threshold for “well capitalized.”
Insurance’s combined ratio was 98.6%, versus 93.9% in 2021. Automotive Finance generated $5.53 billion in net revenue and $2.25 billion in pretax income, compared with $5.46 billion and $3.38 billion, respectively, in 2021.
Material changes versus 2021
- Net income from continuing operations fell 44%, despite 11% growth in net financing revenue. The increase in credit-loss provision, higher expenses, and weaker investment results more than offset revenue growth.
- Credit-loss provision rose to $1.40 billion from $241 million. Consumer net charge-offs were $897 million versus $258 million; automotive net charge-offs rose to $785 million from $237 million. The allowance increased to $3.71 billion, or 2.7% of finance receivables at both year-ends.
- Interest expense increased to $2.86 billion from $1.91 billion as deposit and other funding costs rose with market rates. Average deposit cost increased to 1.39% from 0.75%.
- Other investment results shifted to a $120 million net loss from a $285 million gain. Available-for-sale securities generated $4.0 billion of net unrealized losses in other comprehensive income, contributing to accumulated other comprehensive loss of $4.06 billion.
- Deposits grew $10.7 billion, including $7.9 billion in brokered deposits; total available liquidity declined, primarily because of lower unencumbered highly liquid securities.
- Ally repurchased $1.65 billion of common stock and declared $1.20 per share in common dividends during 2022. Common shares outstanding declined to 299.3 million from 337.9 million.
Outlook, management commentary, risks, and unusual items
- The filing does not provide a specific earnings or revenue guidance range. For its year-end credit-loss estimates, management’s macroeconomic forecast reflected mild recessionary conditions in 2023, including unemployment rising to approximately 4.6% in the fourth quarter of 2023.
- Ally described itself as liability sensitive and said rising interest rates were expected to negatively affect near-term net interest income. Its sensitivity analysis estimated that an instantaneous parallel increase of 200 basis points would reduce forecast pretax net financing revenue by $76 million over the following 12 months; results depend on assumptions and are not forecasts.
- Management noted that early loss performance for consumer automotive loans originated from the third quarter of 2021 through the second quarter of 2022 was trending above expectations. Used-vehicle loans represented 67.0% of consumer automotive loans at year-end, and used-vehicle values and lease residuals remain material risks.
- Off-lease vehicle disposition shifted toward dealer and lessee buyouts: those channels accounted for 88% of disposals, versus 64% in 2021. Average remarketing gain per vehicle declined to $1,533 from $2,693.
- Automotive exposure includes meaningful GM and Stellantis business. In 2022, these dealers and customers represented 31% and 55% of new-vehicle dealer inventory financing, respectively, and 22% each of consumer automotive financing volume.
- Other risks include intense deposit competition, $26.1 billion of certificates of deposit scheduled to mature in 2023, regulatory limits on capital distributions, cybersecurity and third-party service disruptions, and legal and regulatory contingencies. Management stated it did not believe currently threatened or pending legal matters were likely to materially affect consolidated financial condition after existing accruals, while noting that losses in a particular period could be material.
- Unusual items include a $136 million impairment of Ally’s investment in BMC Holdco and the settlement of its qualified defined-benefit pension plan, which resulted in a $115 million loss reclassified from accumulated other comprehensive loss. The 2022 securities losses were primarily rate-related; management reported no expected credit losses on the available-for-sale and held-to-maturity securities in an unrealized loss position.
- After year-end, the Board declared a $0.30-per-share dividend, paid in February 2023, and Ally issued $500 million of subordinated notes in February 2023.
Important facts for investors to verify
- Whether automotive delinquencies and charge-offs, particularly for the 2021–2022 origination vintages, continue to rise and how that affects provisions and the allowance.
- How used-vehicle prices, lease residual values, and the shift in off-lease disposition channels affect future depreciation expense and remarketing results.
- Deposit retention, pricing and mix—including brokered deposits and 2023 certificate maturities—and the resulting funding costs and available liquidity.
- The implications of the $4.0 billion unrealized securities loss, accumulated other comprehensive loss, and declining reported capital ratios for capital flexibility and distributions.
- Exposure to GM and Stellantis, and developments affecting the BMC Holdco investment and other legal or regulatory contingencies.