We can envisage two positive scenarios for shareholders: In short, management is really focused on shareholder remuneration rather than growth at all costs, which is quite good in the banking sector where growth necessarily comes with a higher risk. Simply put, Ally has returned its market capitalization ($10 billion) to shareholders over the past five years ($7.5 billion via share buybacks and $2.5 billion via dividend payments). Despite these two metrics, book value increases from $40 to $52 per share over the period. At the same time, the dividend payout has increased fourfold over the period 2016-2022, from 8 to 30 cents per share. In total, the number of outstanding shares has decreased by 37% since 2016, which is quite impressive. In 2021, it will also have spent the absolutely uncommon profit on massive share buybacks. It already carried out significant share buybacks between 20, when the stock was trading at less than ten times earnings. In any case, we can see that management has been clever. However, the fundamentals of the automotive market remain strong, with high trade-in values for used vehicles and strong demand for auto loans. However, this could be a handy cushion in the event of stress in the auto credit market. The bank is well capitalized and estimates that it currently retains $4 billion in excess capital. As a result, Ally has averaged an adjusted efficiency ratio of 47% (excluding insurance operations) over the past five years, compared to an average of 55-60% for its peers. As an online-only bank, Ally has a lower cost structure than its peers with large branch networks. Some 85% is funded through customer deposits. It leads the market in prime auto lending. The continued growth of Ally's retail deposit base is appreciated. It has $131 billion in deposits and 10 million customers. The lending bank therefore takes risks and asks for financial compensation in return by applying a higher rate. As a reminder, a subprime loan is a loan that differs from others in that it is granted to people whose income suggests that repayment will be more complicated. Ally does not do "subprime" (more profitable but more risky) unlike for example Santander, Carvana or Credit Acceptance. The company makes the vast majority of its pre-tax profit (more than 90%, in fact) through its "prime" auto lending business, meaning that Ally Financial is the only bank in the U.S. In addition to being America's largest online-only bank, Ally Financial is also the nation's largest auto lender and one of the top 25 banks by assets.
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