|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's range||16.33 - 16.33|
|52-week range||16.33 - 16.33|
|Beta (5Y monthly)||N/A|
|PE ratio (TTM)||5.99|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
The Ally Financial Inc (NYQ:ALLY) share price has risen by 7.63% over the past month and it’s currently trading at 15.24. For investors considering whether to...
(Bloomberg Opinion) -- Goodbye, high-yield savings accounts. We hardly knew you.For years, the oxymoronic products were a resounding success for both consumers and financial institutions alike. After getting almost zero interest from big U.S. banks, individuals who parked their excess cash with the likes of Ally Financial Inc., Barclays Plc, Goldman Sachs Group Inc.’s consumer bank, Marcus, or HSBC Holdings Plc’s HSBC Direct were suddenly bringing in a comparatively bountiful 2% or more around this time last year. At that point, the Federal Reserve had raised its short-term interest rate for what would be the final time this cycle in December 2018. The rest is history. First, the Fed felt compelled to lower interest rates three times from July through October to offset the economic impacts from the Trump administration’s trade wars. That, as I noted in an October column, brought prevailing high-yield savings rates dangerously close to the fed funds rate. And yet, in early 2020, Marcus users could still lock in that 2% magic number by opting for a no-penalty certificate of deposit.Then the coronavirus happened. This chart says it all: As it’s plain to see, there’s now a chasm between the fed funds rate and the going rates on some top high-yield savings accounts. The banks have so far moved lower gradually, likely to avoid sticker shock that would cause their customers to take their deposits elsewhere. But even with online banking’s cost-saving advantages over more typical brick-and-mortar institutions, they can’t defy gravity forever. Eventually, rates will have to head closer to the zero lower bound. These savings accounts will still hang around but will hardly seem to fit the moniker of “high yield.”Marcus announced the cut to its savings rate on May 8 with this message:“Effective today, the rate on our Marcus high-yield Online Savings Account has been adjusted down to 1.30% from 1.55% APY. We understand that this isn’t welcome news. During this unprecedented time, please know that the rate on our Marcus Online Savings Account remains highly competitive with an APY that’s still 4X the national average. You can rest assured that we continue our commitment to providing value and helping your money grow.”“For a guaranteed return, consider adding a fixed-rate No-Penalty CD. You’ll earn a high-yield rate with the flexibility to withdraw you balance beginning 7 days after funding. Our 7-month No-Penalty CD currently earns 1.55%.”The marketing is top-notch. First, it’s transparent about being bad news, but then quickly pivots to play up that Marcus still provides comparatively more interest than accounts at Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. The announcement also wastes no time suggesting a no-penalty CD to make up for the lost interest (and, in a benefit to Goldman, create a “stickier” deposit). Marcus is a relatively new venture for Goldman, and it seems reasonable to assume the investment bank will operate it with Chief Executive Officer David Solomon’s “evolutionary path” in mind. Goldman is looking to diversify away from historically volatile trading revenue, much like its Wall Street rival Morgan Stanley. If it means running Marcus with tight margins to keep customers in the fold, so be it.A bank like Ally, on the other hand, may have less flexibility. Heading into this year, it was fresh off of an upgrade by S&P Global Ratings to BBB-, one step above junk. That upswing didn’t last long; it was one of 13 banks that S&P put on negative outlook earlier this month. Analysts said it “could be more sensitive to the economic fallout from the Covid-19 pandemic than the average U.S. bank. We attribute this sensitivity to Ally's sizable concentration in auto lending that may face heightened risk of financial distress in the current economic environment.” Also a risk: “Ultra-low interest rates will weigh on net interest income,” which accounts for more than 70% of Ally’s net revenue.Ally, for its part, also knows how to sell itself. “People don’t want to hear messages that are depressing and that add to their anxiety,” Andrea Brimmer, chief marketing officer at Ally, told the Financial Brand in an article published last week. “They want to hear optimism and they want to hear about purposeful ideas that make them feel like the world is going to kind of get back to normal.” The theme of a campaign promoting its savings options: “Is your money not sure what to do with itself?”Whether Ally, Barclays, Marcus or HSBC are the answer to that is an open question. As it stands, these interest rates barely cover the market-implied inflation rate over the next 10 years. That’s somewhat by design, of course — the Fed cuts rates in part to encourage borrowing and purchases of riskier assets, both of which boost the economy more than parking cash in a high-yield savings account. Stocks, however, seem increasingly detached from the current economic reality. In that sense, Ally’s focus on being unsure might resonate with individual investors.Future interest rates on high-yield savings accounts are on equally shaky ground. While there’s not much in the way of precedent, it’s safe to say they’ll continue to offer more than the rock-bottom rates on money-market funds. Banks will probably do whatever they can to delay going below 1%, a round number that could be the last straw for some individuals. Other than those parameters, though, anything is possible; such is life at the zero lower bound.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Goldman Sachs's Marcus, CIT, Citibank, Ally, and many more popular online savings banks have lowered their rates, responding to the Fed's historic rate cut in March.
Could Ally Financial Inc. (NYSE:ALLY) be an attractive dividend share to own for the long haul? Investors are often...
(Bloomberg Opinion) -- What’s more important: a roof over your head or a car in your driveway? With unemployment rising as the coronavirus shuts down parts of the U.S. economy, the decision made by borrowers as their payments come due will determine how securities backed by auto loans and leases perform.Families will start to struggle as Covid-19 deepens its grip and job losses rise. Of the $14 trillion of consumer debt, mortgages account for $9 trillion and cars $1.3 trillion; however, more Americans have auto loans. When social distancing becomes the norm, cars seem more likely to fall down the priority list behind payments for homes, Netflix bills, phones and credit cards. With lockdowns spreading, many people aren’t going anywhere right now. That means the default risk is rising. Rating agencies are reassessing portfolios of loans and leases linked to asset-backed securities, or ABS, using loss levels from the 2008 financial crisis to calculate risk.When these car-related debts start going bad, the impact on the bonds they back is severe. The spread of auto ABS over Treasuries widened sharply in recent weeks, more so than on card-backed debt. The current dislocations in credit markets show that while auto-loan defaults may not be the center of a financial crisis like mortgage-backed securities, they could well set off wider panic as consumer confidence crumbles, household balance sheets deteriorate and big issuers – car companies – struggle.This market has grown rapidly since the last financial crisis. Already this year, almost $30 billion of auto asset-backed bonds have been issued in the U.S., following $118 billion in 2019. As of the third quarter last year, $250 billion was outstanding. At year-end, annualized loss rates on subprime auto ABS were around 9%, close to financial-crisis levels, while average interest rates have been even higher at 19%, according to Goldman Sachs Group Inc.Two factors will determine how these bonds perform: unemployment and the value of used cars, because cash flows come directly from borrowers. In the aftermath of a natural disaster, used-car prices rise because property has been damaged or destroyed. In this crisis, they’re likely to fall due to strain on consumer wallets. That reduces the worth of the collateral and lowers the residual value of leases that back some of these securities. Cars are, after all, a depreciating asset.What does this mean for the securitized bonds? Lenders and originators package pools of loans and leases in a special-purpose vehicle that then issues debt to investors. The interest and principal payments are structured into classes. Broadly, the more senior tiers have first claim on all cash flows and assets, while the junior take the first hit on losses but have higher yields. The lowest tranche, also known as the equity or first-loss pieces, is typically held by the issuer: auto companies’ financing arms and other lenders. When loans default and the asset pool can’t make up for the payments due to investors, the holders of the lower tranches absorb the loss.It will be yet another blow for the finance companies of already-struggling carmakers that issue ABS to finance leases and sales. They’ll take the first hit through the equity. Funding costs will surge and in turn squeeze sales, reminiscent of 2008.(3)As sales showed signs of reaching a plateau last year, auto giants, dealers and finance companies were pushing excessive financing with looser underwriting standards and conditions, such as longer terms and incentives. The weighted average credit score for non-prime loan pool borrowers was 590 last year, lower than 597 in 2008.Household balance sheets were strong overall going into this crisis, but varied greatly across income levels. The bottom 20% of American households are far more leveraged — more than 25% — than the higher income brackets on a debt-to-assets basis. Around a third of auto ABS are typically made up of subprime loans, where the ability to pay drops off sharply and suddenly.That doesn’t bode well. Companies like Ally Financial Inc. have already offered relief packages for consumers and dealers. Payments can be deferred for six months without late fees. New customers will be allowed to defer for three months. The Federal Reserve has brought back a financial crisis-era lending facility that’s meant to support the asset-backed securities market, where auto loans and leases are among the eligible collateral.The troubles will go further: There are other auto sector-related ABS, like those backed by rental cars and dealer-floor financing plans that are even more directly dependent on automakers’ health.Sure, structures have changed since 2008 to help lower the risk for investors on these bonds. But the underlying issues remain the same: consumers’ buying and borrowing behavior.Investors are busy thinking about mortgage-backed securities, given their large size and potentially deeper and more immediate impact on the financial system. But it’s important to consider recent consumer trends: Delinquencies as a portion of outstanding loans have been on the way down for mortgages. They’re rising for autos, especially among subprime borrowers, as are past-due loans. America has always been a nation of drivers and the appeal of cars has a way of pushing consumers to stretch their budgets in a way houses don’t. But the stay-in-place strategies to fight this pandemic may change that calculus in a way investors aren’t prepared for: Driving behavior could change.(1) Unable to secure affordable financing, the financing arms severely curtailed lending and leasing activity. This caused vehicle sales volumes to plummet and hastened the Chapter 11 bankruptcy filings of Chrysler on April 30, 2009, and General Motors Inc. on June 1, 2009, according to S&P Global Ratings.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
It's been a mediocre week for Ally Financial Inc. (NYSE:ALLY) shareholders, with the stock dropping 11% to US$25.39 in...
Readers hoping to buy Ally Financial Inc. (NYSE:ALLY) for its dividend will need to make their move shortly, as the...
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Many online savings accounts paid over 2% in June, before the Fed began its rate cuts. Now the Fed is holding steady, but savings accounts could sink lower.
The coming week’s docket of economic reports and earnings releases comes just following the Trump administration’s announcement of a partial trade deal with China late last week.
Ally Financial cleared a 34.33 cup-base buy point. Relative strength line at new high. The auto lender is in a market sweet spot – some financials and auto lenders are breaking out or leading.STOCK MARKET TODAY is sponsored by Interactive Brokers. To open an account, go to ibkr.com/whyib