Ally Financial (ALLY): Reiterating Buy After Non Deal Roadshow - Jefferies
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Jefferies analyst, John Hecht, reiterated his Buy rating on shares of Ally Financial (NYSE: ALLY) after hosting a series of investor meetings leading the analyst to believe the market is overdiscounting credit risk and competitive threats.
ALLY is now a diversified, market leading auto lender, compared to its earlier history of being largely captive to GM subvention programs. From a balance sheet perspective, ALLY now has a diversified capital structure bolstered by low cost deposits which are sourced from successfully growing online bank. The combination of a diversified operating business and a strengthened capital structure means that ALLY should be able to both better withstand economic downturns as well as take advantage of periods of economic expansion.
Recent credit trends, including NCOs (2Q NCOs were just 56 bps, annualized), delinquencies and ALLL levels all represent reasonably consistent trends relative to expectations, and reflect a relatively benign credit environment. Further, ALLY has unique tools, such as in house residual value analytics and a dealer-to-dealer auction which should bolster relative credit performance over a cycle.
No change to the price target of $28 which is based on ~12x FY16E EPS.
Shares of Ally Financial closed at $19.57 yesterday.
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