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Ally targets acceleration in retail deposit growth but will not lead on rates


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Ally targets acceleration in retail deposit growth but will not lead on rates

After achieving "record" deposit growth in 2016, Ally Financial Inc. officials said Jan. 31 that they expect the pace of expansion to "accelerate somewhat" in 2017.

The company reported $79.02 billion in total deposit liabilities as of Dec. 31, 2016, up $12.54 billion from the same date in 2015. Retail deposits at Ally Bank accounted for $66.58 billion of the year-end total, which marked an increase of $11.15 billion from Dec. 31, 2015.

"We think the retail deposits will grow in excess of what they grew in '16 to a nice extent," CEO Jeffrey Brown said during a conference call. Company officials emphasized that they expect the expansion to occur without the bank having to meaningfully raise rates on deposit products.

"We don't think we're going to see any real dramatic change in the stance of rates over at least the next few months," Brown said, referencing a "very muted reaction" across the industry to the last two increases in the federal funds rate. The company reported that its average retail deposit rate was 1.10% in the fourth quarter of 2016, unchanged from the third quarter of 2016 and down 2 basis points from the year-earlier period.

"We're the biggest online depositor today, so we're a little bit of a bellwether," said CFO Christopher Halmy. "And we have no intention of leading rates up."

Halmy added that Ally intends to remain "pretty consistent" on pricing as long as it continues to experience growth in its overall book in terms of the amount of deposits and the number of customers.

"Deposit growth is very powerful as we reduce high-cost debt and efficiently grow our earning asset base," Brown said. Halmy said deposits constitute about 54% of the company's overall funding mix, and he believes a percentage as high as 75% "could be realistic."

The company affirmed guidance it previously issued for growth in adjusted EPS, projecting that the rate of expansion would be 15% or less in 2017 and greater than 15% in 2018 and 2019. Brown said hitting 15% "could be a stretch" in 2017, given expectations for continued declines in auto lease balances, but he expects the growth rate to accelerate in 2018.

"The earnings growth foundation has been set with deposits and lower cost of funds fueling our businesses," Halmy said, "and we're now in a great position to build on it for many years to come."