DBRS, Inc. (DBRS Morningstar) has placed the ratings of Ally Financial Inc. (Ally or the Company) and its primary banking subsidiary, Ally Bank, including the Company's Long-Term Issuer Rating of BBB (low) Under Review with Positive Implications.

KEY RATINGS CONSIDERATIONS

The Under Review with Positive Implications considers Ally's resilient and improving credit fundamentals which are similar to those entities in the next rating category. Despite the difficult operating environment, Ally's performance through the Coronavirus Disease (COVID-19) pandemic has been better than anticipated, including resilient earnings generation and strong credit performance. The review will focus on whether the Company can sustain its improving credit fundamentals. DBRS Morningstar expects to conclude the review within 90 days.

RATING DRIVERS

Continuing solid credit fundamentals, including resilient earnings generation without a material increase in the Company's risk profile, would lead to an upgrade in the ratings. If credit fundamentals were to moderately deteriorate but remain manageable, Ally's ratings would likely be confirmed at their current rating level. A substantial sustained decline in Ally's core profitability metrics or significant erosion in its credit profile, would result in a ratings downgrade.

Franchise Combined Building Block (BB) Assessment: Good / Moderate

The Company has significant scale of operations, with a top-tier auto finance business that includes a deeply entrenched dealership network totaling 20,353 dealers, as well as its broadening menu of products and services. With an operating history of over 100 years in the auto industry, Ally maintains considerable institutional and industry knowledge, which has assisted the Company's seasoned management team in successfully navigating Ally through the ongoing but moderating coronavirus pandemic.

Over the past several years, Ally has taken steps to diversify, as well as greatly improve its funding profile. Within its primary business, auto lending, Ally was once strictly an originator of new vehicle loans. Now it originates a better mix of used and new vehicle loans. Through its four moderately sized non-auto related businesses, the Company has expanded its product offerings. These businesses include Ally Invest, its digital brokerage and wealth management platform, Ally Home, which provides residential mortgage products for home purchases and refinancing, Ally Lending, which provides fixed rate installment loan products through a fully digital application process with a focus on point-of-sale lending, and the Company's Corporate finance business, which provides asset based and cash flow financing. Of note, in November 2021, the Company entered into a definitive agreement to acquire Fair Square Financial, a modestly sized credit card company focused on consumers with an average FICO score of 660 that will further diversify its product/service offerings.

Earnings Combined Building Block (BB) Assessment: Good / Moderate

Despite the difficult operating environment, earnings for the most part have been resilient, in part reflecting positively on the Company's continuing diversification of its product offerings and customer base, including its focus on growing its used vehicle loan portfolio and sourcing more of its loans through growth channels. Indeed, increasing levels of used vehicle originations have countered the impact of constrained new vehicle originations resulting from OEM production constraints due to supply chain disruptions, which have also resulted in lower levels of commercial auto loan originations. Reflective of the Company's strong auto finance business, consumer auto originations increased to $12.3 billion in 3Q21, up from $9.8 billion in 3Q20, including a record high $7.8 billion of used retail volume representing 64% of total originations. Importantly, this progress in earnings resiliency has occurred with no material alteration in the Company's risk profile. We note that through the pandemic, the Company reported only one quarterly loss in 1Q20, primarily due to the implementation of CECL and higher provisioning due to coronavirus concerns.

Risk Profile Combined Building Block (BB) Assessment: Good / Moderate

Importantly, credit performance through the pandemic has been much better than expected, reflecting the success of the Company's deferral program, its strong underwriting and servicing platform, the robust used vehicle markets, as well as the impact of government stimulus programs. The Company maintains a sound risk profile underpinned by strong underwriting and servicing capabilities, and a predominately prime lending portfolio. Ally's exposure to nonprime lending (Company defined: FICO

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