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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (71391)	10/22/2022 6:52:46 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78752

Yes, they had non realized losses on their bond / MBS portfolio. The good news is that if they hold it to maturity, the bonds will go back to par eventually, so Ally’s book value should revert back. It’s just an opportunity cost in term is generating interest (as they are low yielding). The unrealized losses don’t even hit CET1 capital. Even if it’s doesn’t, their CET1 Capital has been going down over the last 5 quarters, because they gorged on buybacks, which they stopped doing, now that the stock is cheap. That one reason the CFO left. The other reason is that they are a significant lender to Carvana as they consumer finance some of their cad sales and maybe do some securitization. Her ie an ominous excerpt from the CC: Jeffrey Brown Yes. Thank you. So what I would say there, obviously, we are watching Carvana closely. We engage at my level and certainly our Head of the auto business, Doug Timmerman, with [ Ernie ] quite regularly about their journey here. What I would say, our exposure while we do have retail commitments out there, there are price determinations. “Watching closely” mean that they are very concerned about it and perhaps it’s close to them “pulling the rug” on CVNA loans. I am guessing that’s another reason they booted the CEO, but in any case, it will be interesting to see what the new CEO has to say about this. Personally, this all looks like a big mess to me. Ally over gorged on buybacks and strained their capital at a time where car loans were doing great and now the market turns sour. When you watch what some YouTubers are saying about the car market, you will know that wholesale used car prices are in free fall and consumer prices are bound to fall, which means collateral for loans become questionable. This translates into increased default probability and loss severely and Ally has already seems this showing up in their numbers, but it’s certainly to get worse. I own some COF in that space (they also do CC loans) and hope that they have talking a more sensible path. Their CET1 numbers is way higher for once (~12% compared to Ally’s ~9.3%).