Market Overview

Ally Financial's Subprime Segment Improves In January


Ally Financial Inc's (NYSE: ALLY) improving results from its subprime auto lending sector will help chip away first-quarter consolidated net charge-offs, an analyst said Monday.

The company's newly named Chief Executive Jeffrey J. Brown told Reuters last week that subprime lending will become increasingly important part of Ally's business.

Ally, previously known as General Motors Acceptance Corp., changed hands recently at $21.18, down nearly 3 percent.

Morgan Stanley's Cheryl M. Pate and said the expected first- quarter improvement in total net charge-offs is related in part to seasonal trends, which typically see the highest auto losses in the fourth quarter.

But Pate also noted that net losses within Ally's subprime trusts fell in January by 27 basis points from December, to 1.6 percent.

Pate who maintained an Overweight rating on Ally, predicted consolidated net charge-offs will decline to 1.02 percent in the first quarter, from 1.1 percent from the fourth quarter.

Ally is expected to boost its subprime business to help staunch the loss last month of its exclusive leasing deal for three of General Motors Corp (NYSE: GM) four brands. The company expects to lose its exclusivity on Chevrolet as well.

Former Ally CEO Michael Carpenter was widely quoted using vulgar language in referring to GM's action earlier this month, and was quickly replaced by Brown.

Ally got bailed out during the 2008 financial crisis by the federal government through its Troubled Asset Relief Program.

Ally made an initial public stock offering last April and the U.S. Treasury sold its remaining shares in December.

Latest Ratings for ALLY

Oct 2019MaintainsBuy
Oct 2019DowngradesOverweightNeutral
Sep 2019MaintainsOverweight

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Posted-In: Cheryl M. Pate Morgan StanleyAnalyst Color Analyst Ratings


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