Ally Financial (NYSE:ALLY) executives highlighted stronger profitability, improved credit trends, and continued balance sheet repositioning during the company’s fourth-quarter 2025 earnings call, while also outlining a 2026 outlook that assumes ongoing margin expansion and modest growth in core loan portfolios.
2025 performance and “focus strategy” recap
Chief Executive Officer Michael Rhodes said 2025 was marked by a strategic refresh centered on investing in businesses where Ally believes it has “clear competitive advantages.” He pointed to improved earnings, credit performance, and capital levels as evidence of progress from what he described as “deliberate choices backed by disciplined execution.”
Rhodes also cited several actions taken during 2025, including exiting non-core businesses, repositioning part of the investment securities portfolio toward a more neutral rate position, reducing controllable expenses by 1% versus 2024, and executing two credit risk transfer transactions totaling $10 billion in notional retail auto loans.
Core franchises: auto, insurance, corporate finance, and deposits
In Dealer Financial Services, Rhodes said Ally processed 15.5 million applications, an “all-in record,” which allowed the company to be selective in originations. Ally originated $43.7 billion in consumer loans for the year, up 11%, with a 9.7% origination yield, and 43% of volume concentrated in the highest tier of credit quality.
Rhodes also highlighted growth in fee-related businesses tied to the auto franchise, including SmartAuction and pass-through programs, which management expects to support “durable fee growth” over time.
In insurance, Rhodes said written premiums exceeded $1.5 billion, a record for Ally, and emphasized synergies with auto finance as part of the company’s value proposition for dealers.
Corporate finance delivered a reported 28% ROE with portfolio growth, and Rhodes said the business posted a second consecutive year with no charge-offs, which he attributed to underwriting discipline and Ally’s role as lead agent in most transactions.
In the digital bank, Ally ended the year with $144 billion in retail deposit balances. Rhodes said balances were roughly flat for the year, in line with expectations, and the company reached 3.5 million customers, marking its 17th consecutive year of customer growth. He noted that retail deposits represent nearly 90% of total funding and that 92% are FDIC insured.
Fourth-quarter results: revenue, expenses, and asset quality
Chief Financial Officer Russ Hutchinson said fourth-quarter net financing revenue (excluding OID) was $1.6 billion, up 6% from the prior year, supported by “disciplined deposit pricing” and balance sheet optimization toward higher-yielding assets.
Adjusted other revenue was $550 million, down 2% year over year, excluding a $27 million loss tied to moving nearly $400 million of legacy mortgage assets to held for sale. Hutchinson said Ally is taking advantage of “a strong bid for mortgage credit” to sell portions of the portfolio that carry complexity and higher servicing costs. After the expected sale, he said the remaining mortgage portfolio will be entirely first-lien fixed-rate mortgages, which will continue to run off.
On expenses, adjusted non-interest expense was $1.2 billion, excluding a $31 million restructuring charge associated with a reduction in force. Hutchinson said the actions create capacity to invest in areas such as “cyber and AI.” For the full year, adjusted non-interest expense was approximately flat, while controllable expenses declined 1%.
For the quarter, Ally reported GAAP EPS of $0.95 and adjusted EPS of $1.09.
Credit performance improved on a year-over-year basis in retail auto, with Hutchinson reporting fourth-quarter retail auto net charge-offs (NCOs) of 2.14%, down 20 basis points from a year earlier. Full-year retail auto NCOs were 1.97%, below the bottom end of Ally’s prior guidance range. Consolidated NCOs were 134 basis points in the quarter, up sequentially due to seasonality, while commercial portfolios posted zero net charge-offs for the second consecutive year.
Hutchinson said 30-plus all-in delinquencies were 5.25%, down 21 basis points from the prior year, marking the third consecutive quarter of year-over-year improvement. Reserve coverage ended the quarter at 2.54% consolidated, while retail auto coverage was flat at 3.75%.
Net interest margin, lease dynamics, and 2026 guidance
Net interest margin (excluding OID) was 3.51% in the fourth quarter, down 4 basis points sequentially, producing full-year NIM of 3.47%. Hutchinson said retail auto portfolio yield (excluding hedge impacts) increased 6 basis points sequentially, but margin was offset by repricing of floating-rate exposures and lower lease yields. Cost of funds fell 11 basis points quarter over quarter, driven by a 12-basis-point decline in deposit costs.
Management discussed pressure in a subset of lease terminations, with Hutchinson noting $11 million of losses concentrated in certain weaker-performing models. He said plug-in electric hybrid residual values were pressured by the elimination of the EV tax credit, an OEM recall, and increased OEM incentives on new models. Hutchinson added that the lease portfolio mix is shifting, with about half of leases originated over the past two years carrying OEM residual value guarantees.
For 2026, Hutchinson guided to:
- Full-year NIM of 3.6% to 3.7%, assuming two Fed rate cuts, with NIM expected to be “slightly down” sequentially in 1Q before improving later in the year.
- Retail auto net charge-offs of 1.8% to 2.0%; consolidated NCOs of 1.2% to 1.4%, reflecting an assumption that commercial credit returns to more normalized loss levels.
- Low single-digit percentage growth in other revenue, including an estimated $25 million headwind from the loss of card fees.
- Expense growth of approximately 1%, with continued investment in AI, cyber, servicing, and customer experience.
- Average earning assets growth of 2% to 4%, with retail auto and corporate finance expected to grow in the mid-single digits while mortgage loans and lower-yielding securities run off.
- Effective tax rate of 20% to 22%.
Hutchinson reiterated management’s longer-term framework for achieving mid-teens returns: an “upper threes” NIM, a sub-2% retail auto NCO rate, and continued capital and expense discipline. He said Ally has achieved two of the three, with NIM expansion remaining the key outstanding item.
Capital, buybacks, and ROTCE methodology update
Ally ended 2025 with CET1 of 10.2%, and a fully phased-in CET1 ratio (including AOCI) of 8.3%, up about 120 basis points during the year. In December, Ally announced a $2 billion open-ended share repurchase authorization. Hutchinson said the company repurchased $24 million of common stock during the quarter, reflecting its stated “low-and-slow” approach.
Executives repeatedly framed capital deployment as an “and, not or” strategy—supporting organic growth, maintaining the dividend, building fully phased-in capital toward a 9% management target, and returning capital via buybacks.
Hutchinson also said adjusted tangible book value per share ended the year at $40, up nearly 20% over the past year. He noted Ally expects $400 million to $450 million of after-tax AOCI accretion per year going forward, supporting tangible book value growth.
Finally, management said it updated its core ROTCE methodology to improve transparency and comparability, including eliminating a deferred tax asset adjustment from the prior methodology. Hutchinson said the change does not alter the company’s return targets, timing, or outlook.
About Ally Financial (NYSE:ALLY)
Ally Financial Inc is a leading digital financial services company headquartered in Detroit, Michigan. The company offers a comprehensive suite of banking, lending, and insurance products designed for retail and commercial customers. Through its online-only platform, Ally Bank provides checking and savings accounts, certificates of deposit, money market accounts, and home mortgages, emphasizing competitive rates and user-friendly mobile and web experiences.
In addition to its banking operations, Ally Financial is a major player in automotive financing and leasing.
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