Ally nearly doubles net income to $360 million in Q2

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Ally had record application volume of 2.9 million, up 6 percent, though its approval rate was roughly flat at 35 percent, CEO Jeffrey Brown said.

Ally Financial’s auto loan and lease originations fell 13 percent in the second quarter to $9.4 billion as the lender focused on profitability over quantity, executives said today.

Despite the origination decline, overall net income nearly doubled to $360 million and net financing revenue grew 7.4 percent from the year-earlier period to $984 million.

Ally’s auto finance business posted a pretax income of $426 million, up 14 percent.

The improved results came as Ally lost some of its superprime, lower-yielding business, CFO Chris Halmy told Automotive News.

“But we feel good about the profitability of loans we have put on the books,” he said.

‘Disciplined’

Among the major auto lenders, origination levels fluctuate quarter to quarter. “Some of that is a dynamic on pricing. We are being pretty disciplined on getting the right profitability on loans,” Halmy said.

If a competitor becomes more aggressive on pricing, Ally won’t chase that, he said. But if other lenders pull back, Ally may be willing to take on more loans. Ally is “not concentrating on quarter or annual volume as much as the profitability that we are getting,” Halmy said. “We want to make sure we are getting prices the right way.”

Ally had record application volume of 2.9 million, up 6 percent, though its approval rate was roughly flat at 35 percent, CEO Jeffrey Brown told Automotive News.

The lender’s total dealership base has surpassed 18,000, which Brown says allows Ally to cast a wider net and look at more applications coming through the market.

More prime

Ally’s prime business, those with credit scores of 660 to 739, grew slightly to 37 percent of the portfolio from 34 percent a year earlier. On the opposite end of the spectrum, nonprime borrowers, with scores below 620, fell to 11 percent from 15 percent a year earlier.

Chrysler’s share of Ally’s portfolio grew to 28 percent from 24 percent a year earlier. Likewise, the share of Ally’s portfolio comprised of what the lender calls its “growth channel’’ — non-GM and Chrysler franchised dealership clients — rose to 37 percent from 32 percent.

Last year, GM Financial, General Motors’ captive finance company, took over exclusive leasing for all GM brands, taking that business away from Ally, which previously offered subvented leases to GM customers. In the second quarter, the GM business fell to 35 percent, down from 45 percent a year earlier.

Used appeal

New retail standard loans made up 46 percent of originations, down 2 percentage points, and leases made up 9 percent, unchanged.

Consistent with the first quarter, Ally’s used-vehicle business jumped from the year earlier. It reached 43 percent of originations, vs. 37 percent a year ago.

“We like used. You’re not subject to any one manufacturer. You can book a lot of loans on every different nameplate,” Brown said. “Hovering in the 40 to 45 percent range makes strategic sense, but a lot of [the increase] is dealer-driven as well.”

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Ally nearly doubles net income to $360 million in Q2