Dive brief:

  • Allied financial reported a 58% drop in profits as its core auto loan business suffered from dealership closings, the company said in its second quarter earnings call.

  • Ally, America’s 17th largest bank, posted an 8.9% drop in net financing income for the quarter on a 35% drop in new car sales, the largest in a quarter since the Great Recession, according to CFO.com. Despite the decline, the company’s CEO Jeffrey Brown said during the earnings call that its auto finance business “had seen a significant improvement” towards the end of the quarter.

  • “We have seen constant improvement [once] Shelter-in-place orders have eased, ”CFO Jennifer LaClair told analysts on the call. “Ally’s app trends have steadily improved, reaching an all-time high, reflecting supply dynamics and a shift in consumer preferences that fit our model. “

Dive overview:

In the first quarter, Ally suffered a net loss of $ 319 million, compared to net income of $ 374 million at the same time last year. The bank said it set aside more than $ 900 million for loan losses, but in the second quarter it only set aside $ 287 million. LaClair said the bank has seen high payment rates among its customers, not only in the auto retail sector, but also in mortgages and Ally Lending.

Also in the second quarter, Ally generated its 10th consecutive quarter of 96% customer retention rate, LaClair said, adding that its growth of 94,000 customers has pushed the bank to more than 2.1 million customers, or almost double its 2016 level.

“Actual credit performance has been better than expected,” said LaClair. “And although much is still unknown about the current economic environment, support programs and proactive customer engagement actions have resulted in some encouraging trends. … Robust payment activity has occurred with our non-deferred customers, drastically reducing the frequency year over year. “

With consumers forced to refrain from in-person transactions, many digital banks are hitting their stride, and Ally says it’s part of that trend. “Ally has positioned itself, with our digital capabilities, [to] keep winning, “she said.” There is no doubt that direct banks will continue to win in this environment. “

Brown said he and his team had “diligently and intentionally built Ally on pillars of strength to prepare for turbulent times and be able to navigate the entire business cycle,” despite the cancellation of the $ 2.7 billion acquisition of CardWorks by Ally, canceled in June, CFO.com reported.

“We are very proud to be a comprehensive, digitally-focused consumer and commercial finance provider, and we will continue to innovate and adapt,” he said. “We have a strong and well-positioned balance sheet with a solidly rooted base in funding, capital and liquidity that will ensure that we will remain a source of strength for clients over the long term. “

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