Detroit lender Ally Financial Inc. on Tuesday reported higher profits and its largest auto origination volume in more than a decade as consumer demand for cars and trucks remains high.
Ally, one of the largest U.S. auto lenders, reported second-quarter net income of $900 million, nearly quadruple the $241 million it reported in the year-earlier period.
Consumer auto originations grew to $12.9 billion, up 79 percent from $7.2 billion in the second quarter of 2020, and marked the highest level in 15 years. There also was a record 3.5 million applications “decisioned” in the quarter.
For the first time in the company’s history, there was a net recovery in credit, in part driven by strong demand and general spending power for consumers, CEO Jeffrey Brown said on an investor call.
Auto originations covered $7.3 billion in used retail volume, or about 56.6 percent of total originations, as well as $3.8 billion in new-vehicle retail volume and $1.8 billion in leases.
“Credit trends remain encouraging, reducing the likelihood of protracted elevated losses as a gradual migration back to more normalized levels becomes more likely over the next 12 to 18 months,” Brown said.
In the meantime, Ally is further enhancing its ability to reach auto customers through expanded digital channels coupled with analytics, he added. The company monitors broader market indicators of consumer health, including wage and price inflation, employment conditions and productivity measures.
“While there are several cross currents today, I remain of the view that consumers are well positioned with healthy balance sheets, increasing their willingness and ability to borrow and pay,” Brown said.
Nonfleet vehicle sales remain robust, and consumer demand continues to outpace automaker production, he added.
Floorplan balances are expected to remain low, and used-vehicle values elevated.
In the first half of this year, used-vehicle pricing was up about 30 percent, said Jenn LaClair, Ally’s CFO.
“We are expecting … for used pricing to start to normalize in the back half of this year,” she said. “Now, I think the question is around the pacing of that. We do think we’re kind of past the peak, and we would migrate down to more normalized levels at a minimum by 2023.”
In the second quarter, Ally’s adjusted earnings per share was $2.33, compared with 61 cents from the same time a year earlier.
The lender’s pretax income from automotive finance was $917 million, nearly triple the $329 million it reported in the second quarter of 2020.
Net revenue rose 30 percent to $2.09 billion.
Shares of Ally rose 6.1 percent to close at $50.90 Tuesday in New York.