Ally Financial Inc. saw fewer auto loan applications during the third quarter compared with a year earlier, but the dollar value of its new originations remained unchanged at $12.3 billion, the highest level for the quarter since 2006.
Application volume fell to 3.1 million, down 3.4 percent from the third quarter of 2021, though Ally had business relationships with 2,570 more dealerships than a year earlier.
“Our Dealer Financial Services business demonstrated the benefits of scale and deep relationships, evidenced by $12.3 billion consumer originations despite continued supply constraints,” CEO Jeffrey Brown said in a statement Wednesday. He told an earnings call later that day Ally had seen strong loan growth companywide, particularly in its auto finance segment.
Brown said Wednesday he expected Ally would ultimately have written $48 billion worth of new auto financing this year but next year would be “several” billion below that level.
“We’re OK with volume coming down if the [return on equity] isn’t where it needs to be,” he said.
The average auto loan on Ally’s books during the third quarter was $82,362, up 7.6 percent from a year earlier. The average yield rose 0.67 percentage point to 7.29 percent.
Ally reported third-quarter pretax auto finance income of $488 million, down 41 percent from a year earlier, largely driven by the company’s need under accounting rules adopted in 2020 to set aside funds to cover potential losses. This provisioning also takes into account what Ally anticipates to be a more normal level of loan write-offs in the future. Lenders have in recent years been enjoying fewer delinquencies and defaults from pre-pandemic levels.
Ally’s net charge-offs on bad auto loans reached 1.05 percent during the third quarter, up 0.78 percentage point from a year earlier.
The earnings report came a day after Chief Financial Officer Jennifer LaClair stepped down. She will remain in an advisory position until March 3, 2023, at the latest, Ally said in a government filing Tuesday. Corporate treasurer Bradley Brown will serve as interim CFO.
Other results from Ally’s third-quarter earnings report include:
- Q3 revenue: $2.02 billion, up 1.6 percent from a year earlier
- Q3 net income: $299 million, down 58 percent from a year earlier
- Q3 net income attributable to stakeholders: $272 million, down 60 percent from a year earlier
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