Provided by Dow Jones
By Steve Gelsi
Retail car-loan delinquencies rise above expectations
Ally Financial Corp.'s stock fell sharply on Tuesday after the consumer lender said delinquencies in its retail car-loan business were up more than expected as people continue to struggle with inflation.
Ally Financial's stock (ALLY) was down nearly 18% in what would be its biggest one-day decline since the early days of the COVID-19 pandemic, when it fell 21.8% on March 16, 2020.
The stock gave back all its gains for the year on Tuesday and is currently tracking down 6.9% so far in 2024, while the KBW Nasdaq Bank Index BKX has risen 13.6%.
The financial firm said it has been seeing more strain it its consumer car- loan business and warned it may take longer than expected to achieve its long-term target of 15% return on tangible common equity.
"Over the course of the quarter, our credit challenges have intensified," Ally Chief Financial Officer Russ Hutchinson said at the Barclays Global Financial Services Conference in New York on Monday. "Our borrower is struggling with high inflation and cost of living, and now, more recently, a weakening employment picture."
In retail auto loans, Ally Financial said it had seen delinquencies increase about 0.2% above its expectations.
Net charge-offs, which accounts for money that the lender doesn't expect to be paid back, were 0.1% above its projections, Ally said.
"We're clearly dealing with a cohort of borrowers ... who have been struggling with cost of living and now are struggling with an employment picture that's worse," Hutchinson said.
The company hadn't seen any losses in its corporate-finance business, while its credit-card business continued to perform within expectations, Hutchinson added. Its mortgage business continued to perform either in line with or better than expectations, he said.
-Steve Gelsi
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09-10-24 1433ET
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