First Read Ally Financial Inc: Underlying better than EPS miss

研报英文原文证据摘录

First Read Ally Financial Inc: Underlying better than EPS miss

Forecast returns

Forecast price appreciation 18.6%

Forecast dividend yield 2.6%

Forecast stock return 21.3%

Market return assumption 9.2%

Forecast excess return 12.1%

Company Description

Ally Financial is a ~$190bn asset bank headquartered in Detroit, MI, operating the largest all-

digital bank in the US, primarily through three business units: Automotive Finance, Insurance

(together Dealer Financial Services; DFS), and Corporate Finance. DFS provides financing and

insurance services to consumers and auto dealers, and Corporate Finance provides credit

primarily to middle-market companies in the US. The company also provides digital brokerage

services and manages a mortgage portfolio, although recently made a strategic shift away

from the credit card and mortgage businesses.

Valuation Method and Risk Statement

Our price target is derived by applying a target P/E multiple on our 2027 EPS estimate

(weighted 50%) and a target P/TBVPS multiple on our 2026 TBVPS estimate (weighted 50%).

Our target P/E multiple is informed by the company's historical P/E multiple, its historical

multiple vs. peers, and market multiples for the banking industry. Our target P/TBV multiple is

informed by the company's historical P/TBV multiple, its historical multiple vs. peers, and a

regression of industry ROTCE vs. P/TBV multipes. Downside risks include: 1) lower deposit

levels resulting from decreased liquidity levels in the financial system; 2) credit deterioration

and reduced industry-wide loan demand resulting from a potential recession; 3) net interest

margin pressure from additional rate cuts, and 4) lower profitability and capital returns

resulting from a more rigorous regulatory environment.