Ally’s second quarter net profit falls under virus impact
Loss mitigation is a priority for the lender as it prepares for a flood of consumers coming out of forbearance grace periods. Allied CFO Jenn LaClair said in an investor appeal on Friday that consumers coming out of forbearance in the second quarter were some of the lender’s riskiest borrowers and that the bulk of deferred accounts with overdue payments of more than 30 days had expired during this period.
In the first quarter, 1.1 million borrowers asked Ally for forbearance, 70% of whom were never in arrears. A quarter of Ally’s car loan customers have requested payment deferrals in the first weeks of the pandemic.
The payment performance of these borrowers has so far been positive and in line with expectations, LaClair said. Twenty-four percent of forbearers made car payments earlier than expected.
Requests for postponement fell significantly in May and June compared to the peaks in March and April. To date, Ally has processed 1.31 million cumulative deferral program accounts, with 87% of customers up-to-date with their payments.
To protect against future credit losses, Ally also applied more manual underwriting processes instead of automated decisions and raised the credit threshold for auto loan customers, she said.
Provisions for loan losses, or the cash a lender sets aside for loans it does not expect to be repaid, increased $ 76 million year-on-year in the second quarter to reach $ 256 million for auto loans. While high, this is significantly less than the $ 766 million allocated by Ally for auto-related loan losses in the first quarter.
The majority of Ally commercial dealers “have actively participated in at least one of four COVID-19 relief offerings,” the Detroit lender said. Thirty-nine percent of wholesalers deferred floor plan interest and insurance payments to the bank in the second quarter, down 20 percentage points from dealer claims in the first wave of the epidemic.