Ally Financial's Ratings Upgraded By Moody's, Outlook Stable
Zacks Investment Research | Feb 11, 2019 09:07PM ET
Ally Financial’s (NYSE:ALLY) ratings have been upgraded by Moody’s Investors Service. The outlook for the company remains stable.
Ally Financial’s issuer rating witnessed a progress from Ba3 to Ba2. Further, its senior unsecured medium term note program and senior unsecured regular bond/debenture rating have been raised from Ba3 to Ba2.
Reasons Behind Rating Upgrade
Ally Financial witnessed continued improvement in its funding profile backed by the stabilized performance in the auto portfolio and sustained growth in deposits. Over the last three years, the company recorded 20% annual growth in deposits.
Per Moody’s, Ally Financial has been able to raise deposits and hold a considerable portion of existing depositors through the recent interest-rate hikes.
The company’s ratio of market funds as a percentage of tangible banking assets fell significantly during the same period. Ally Financial’s funding profile now comprises 11% secured debt and 8% unsecured debt.
Moreover, Ally Financial has been able to grow its used auto loan portfolio to more than 50% of retail auto originations for 2018.
What Can Further Boost Ally’s Ratings?
A further upgrade in ratings is possible if Ally Financial continues to grow its deposit base and reasonably underwrites growing auto channels. A prudent diversification of the overall portfolio may also result in a ratings upgrade.
What Can Bring Down Ratings?
A rating downgrade could occur if there is a significant decline in the deposit base. A decline in franchised dealer relationship may also lead to a rating downgrade. Further, if growth in riskier credit quality assets hurts asset performance and weakens financial metrics, there might be a rating downgrade.
In the past three months, Ally Financial’s shares have gained 4%, as against the industry ’s decline of 6.6%.
Currently, the stock carries a Zacks Rank #3 (Hold). You can see .
Key Picks
Credit Accept Corporation (NASDAQ:CACC) sports a Zacks Rank of 1, at present. Its shares have rallied 38.3% in the past year.
CatchMark Timber Trust, Inc. (NYSE:CTT) carries a Zacks Rank #2 (Buy), currently. Its shares have gained 3.1% in the past three months.
Enova International, Inc. (NYSE:ENVA) carries a Zacks Rank of 2, at present. Its shares have gained 12% in the past year.
Get The News You Want
Zacks' Best Stock-Picking Strategy
It's hard to believe, even for us at Zacks. But from 2000-2018, while the market gained +4.8% per year, our top stock-picking strategy averaged +54.3% per year.
How has that screen done lately? From 2017-2018, it sextupled the market's +15.8% gain with a soaring +98.3% return.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.