Ally Financial Inc. (NYSE:ALLY) Q4 2022 Earnings Call Transcript

And obviously, I mean we are at 3.3 today. Brad is showing you a scenario where you are going up 45 basis points against maybe a 50 basis point move. So, it’s kind of like a 90% beta. That feels pretty darn aggressive to me. So, it is a balancing act. That’s why we try to add the transparency about what you are assuming on the Fed funds rate. Everyone can kind of do their own math if they think it would go higher. But the nice thing, I would say, in talking to our deposit leader, Paula and our bank leader, , they would tell you things have kind of felt a little bit more stable here in the past three weeks, four weeks. So, we think there is more to go, but I don’t think it’s another kind of 100 basis points from here.

Betsy Graseck: Okay. Got it. And then separately, same kind of theme, how should we think about the impact on loss rates if used car prices fall more sharply than what you have baked in?

Jeff Brown: Yes. I mean obviously, they would go up to some degree. But I think there are a couple of dynamics at play. First, if you look at other industry experts and big names that are out there, they are more modest than the declines that they have projected. I think we have been pretty consistent saying end of €˜21 to the end of €˜23 would be this 30%-ish type decline. We saw a little more than that last year. But as Brad shown you, you have got probably 13 basis points of decline embedded here. I think that €“ the other factor that’s out there is there were about 11 million less cars produced over the past sort of 3 years. And so we think that provides some structural support. We always try to take a more conservative view.

But I mean the way I would think about the range of risk is maybe it’s another 5% decline in used car prices, and that would represent kind of a couple of basis points of incremental NCO. So, it’s fairly well in there. Yes, could it be worse, but we think that’s probably a little bit unlikely from here.

Betsy Graseck: Okay. Thanks so much for the time. Appreciate it.

Jeff Brown: You got it, Betsy. Thanks.

Sean Leary: Great. Thank you everyone. That’s all the time we have for today. If you do have additional questions, as always, please feel free to reach out to Investor Relations. Thank you for joining us this morning. That concludes today’s call.

Operator: And thank you, ladies and gentlemen. This concludes today’s conference and thank you for your participation. And you may now disconnect.