Ally Financial Inc. (ALLY) Earnings Call Transcript & Summary

Moving right along, very pleased to have Ally Finance with us from the company, Jenn LaClair, Chief Financial Officer. Jenn, thank you for being here.

Thank you, Jason, for having me. Great to be here.

Maybe the best place to start is kind of just big picture with strategic priorities. Maybe starting at a high level, Ally obviously has leading market positions with the dealer financial services business, a very large digital bank and then adding a lot of new capabilities. Just maybe talk about how you see Ally evolving over the next few years and what are some of the key drivers?

Yes. Sure. Thank you, Jason. And I really appreciate this opportunity to provide an update on Ally's priorities, the progress as well as our strategic and operating trajectory. But on our strategy, it really is quite simple. We focus on delivering differentiated value for every one of our stakeholders, our customers, our employees and our communities. We start first on our customers, we are 10.5 million strong. We've grown that number 50% since we became a publicly traded company about 8 years ago. And we're about to enter our 54th consecutive quarter of customer growth. And we've done that by continuing to provide differentiated value for our consumers. If you look at our savings rate right now, it's about 15x the national average. It's a great time to move your money over to Ally. And we were the first to be a disruptor and to fully eliminate overdraft fees for our consumers. So continuing to find that opportunity to create that value, in particular because we are the largest digital-only bank that affords us that opportunity. And then on auto, we are the #1 prime lender in auto, and I think it's important to focus on that word prime. It matters where you play in auto. This year, we will, again, 12th year in a row, put over 1 million Americans into vehicles sourced from over 13 million applications and across a dealer network of 22,000. So significant scale in our auto business as well as continuing to invest and modernize our auto platform. In fact, we've kind of assessed we've put over $1 billion in technology investments in our auto business over the last 10 years. Sliding over to employees continue to find ways to differentiate for them. We recognize our human capital is one of our most important assets in the company. By way of example, we just launched our third year in a row of providing Own It grants. So we make every single employee at Ally a shareholder that helps to create an owner's mindset, drive risk-management culture, expense-management culture across the company, and it also has generated some of the highest employee engagement scores across the sector. And then on communities, another area of importance for us, and we focused on kind of accelerating our impact for our communities. We started a foundation about 2 years ago. We've donated $80 million into our foundation, continue to invest in DE&I. In fact, our supplier-diversity spend is up 50% this year, and we continue to find opportunities to invest in diverse talent, including our Moguls in the Making program, which is kicking off in just a couple of weeks now. So Jason, as I take a step back and I think about what makes us unique, what makes us different, I really think we have the best of both. We have the infrastructure, the scale, the sophisticated risk management of a more traditional bank coupled with the fact that we've got a modern technology platform as well as a modern brand. And I think that's really going to help continue us to be able to grow and to grow accretively over time. And then lastly, and certainly not least, but on financials, we've guided for some time around that mid-teens plus ROTCE that is reflective of years of transforming our businesses, transforming our balance sheet. We're confident in that 16% to 18-plus percent through time. Of course, we're all managing a lot of uncertainty right now. Markets are volatile. A lot of questions on where the macros are going to go. But we do believe because of the structural permanent changes we have made across all of our businesses, every nook and cranny of the balance sheet that we're very well positioned to deliver that 3x.

Got it. Maybe put up the first ARS question. I don't know. Just what's your position in Ally? Then we're going to rank all these things after this evening and see where everyone comes out. Interesting. And maybe go to the next question.

It's like a lot of opportunity in this room.

Ally provided guidance that Jenn just reiterated at 16% to 18% plus ROTCE over the medium term. What do you think Ally's normalized level? And I guess, Jenn, maybe as the audience answers that, I remember when I first picked up Ally with a single-digit ROE. So to talk to 16% to 18% plus is nice. Maybe just provide some context in terms of what's driving its outlook and how you plan on executing in this range longer term?

Yes, sure. And I'll start first. I think the proof is really in the actuals. If you look at where we've come, and I appreciate that single-digit comment when 8 years ago before we came public, we had about a 4% ROTCE. We grew that pre-pandemic up to about 12%. We've been outperforming through the pandemic simply because of stimulus and strong consumer balance sheets and we'd expect through normalization to settle out around that 16% to 18-plus-percent. The way that we get there is not really attached to any one thing. It's really about driving business transformation, driving that balance sheet transformation. I'll start first on the asset side. Look, we've changed our investment, our capital allocation. In auto, we've shifted from a super prime lender to a prime lender. We're #1 in prime. We've also allocated more capital to retail versus commercial, which carries higher yields as well as higher returns. We've added unsecured products to our assets as well. And that's a big reason why our asset yield is going to continue to climb and drive accretive profitability for us. We've completely restructured the liability side of the balance sheet, and that's a permanent change that we've made to our debt. We've become core funded. We used to be about 50% deposits. Now we're about 85% deposit funded. We have a very mature deposit-gathering engine. Quite frankly, we've managed risk very carefully through time. We've continued to manage about a 1% NCO rate on a consolidated basis. And keep in mind, our balance sheet is about 95% secured through liquid, high-quality assets, and we've managed interest rate risk as well. And then from just a capital allocation perspective, if you look over the last 5 years, we've nicely balanced investment in strategic growth and distributions to our shareholders. We grew our balance sheet about $35 billion, and we've distributed over $8 billion in capital to our shareholders via share repurchases as well as dividends. But maybe, Jason, let me just talk a little bit more about the business transformation, which is a big part of the sustainable earnings going forward. In our Auto segment, we used to be a super prime lender subvented business. Over the last decade, we've shifted predominantly to the intersection of prime and used. We've actually added about 200 basis points of yield as a result of shifting from super prime into prime. So we used to originate about 5% yields today -- last 7 years, it's about 7%. And this year, with rising rates, that's getting up over 8%. In fact, for 2022, our yields will eclipse over 8%. And so that has driven really material earnings power to our company. In addition to that, we've added unsecured, which is about $3 billion on our balance sheet. We see that growing up to $6 billion to $8 billion in short order, continue to feel really good about the new products we've added and the momentum that we have across our unsecured. On the liability side, look, we have run off over $24 billion of high-cost debt and a 5% coupon. That is not coming back, right? And with a mature deposit-gathering engine that has proven out over time to be a sustained source of liquidity for us, we feel really good about the liability stack. And I mentioned capital allocation, but I think it's important to think about how much we've done. We've bought back 35% of our shares since the inception of our buyback program, and we 4x-ed the dividend over the course of 7 years, including a 20% increase in our dividend this year. So all of that together really nicely positions us to continue to deliver that structurally more profitable company. And I do want to caveat, obviously, we're not running the bank for quarter-to-quarter earnings and, of course, macros matter and will impact us over time. But if we look through cycles, we're confident in that trajectory, Jason.

I guess based on the audience response, there does appear to be some skepticism. And I guess, from my vantage point, the things we most hear about is just auto industry name and credit. So maybe we could just delve into those 3 topics next. In the auto space, one of the things that we've heard at this conference, I think it was Wells, PNC, U.S. Bank Capital, one of them talked about pulling back in auto and whether it's concerns over spread pressures or credit or competition. Could you maybe just talk to -- you had best origination quarter in like 15 years last quarter. You talked about $45 billion in originations this year on the auto front. Maybe just talk to what gives you confidence you could or should put up strong numbers when others are pulling back.

Yes, sure. This is a really important question. And our IR team is on rinse and repeat for the number of questions we're getting on auto. So let me spend some time here. I think if you take a step back and you think about the auto industry, it's very large scale. It's $1 trillion in assets with about $700 billion in originations annually. And across that large segment or large asset class, there's very different subsegments, right? You've got super prime, you've got your prime and you've got your non-prime. A lot of the commentary you're hearing is, quite frankly, in that super prime space. That's where the regional banks play, the money centers play. And we would agree in that super prime space, there's supply issues. So it's hard to find a vehicle. So the market has shrunk as 1% of the total. And second, credit unions have really come in and taken share, especially over the last several quarters. And so we would agree in that super prime segment, it's not a very attractive time to be growing originations. And I think a lot of the shrinkage you're hearing is just a matter of the market has shrunk. On the other side, non-prime, which, by the way, is about 10% of our originations, that's also experiencing supply issues. The lack of available, affordable vehicles is shrinking that segment, making it much more difficult to originate profitability. Where we play at the intersection of prime and used, the vast majority of our originations, we're still seeing strong demand, strong flows, and it's a combination of the market still robust, but we also have that scale and continued growth in application flow, continued growth in dealers. So the combination of our model plus an attractive market is allowing us to continue to originate and to originate profitably. This quarter, just hit it, what will be about $12.5 billion in originations, and those flows are going to be at an 8.5% yield. So still seeing opportunities to originate and to originate profitably. I do want to just comment a little bit broader on auto because we are not just in auto for lending. We have a diversified product set. And so we're seeing opportunities in retail. But we're also growing our insurance platform, our SmartAuction platform, which is a 100% digital auction to dispose the off-lease vehicles, continues to grow in revenue and margin and returns. And then our strategy is for our dealers to send all of us their applications. We'll put on balance sheet, the ones that fit our buybox and then the ones that we pass on, we can monetize through our ClearPath digital tools as well. So it's the complete kind of focus that we have in auto that's continued to allow us to win in this space.

I guess, $12.5 billion in originations this quarter, 8.5% yield. What allows you to take price?

Yes. I mean it's interesting to see that, especially in the kind of higher income balance within that prime segment continue to have high demand for vehicle. And we've estimated just because of supply constraints, there are some 4 million to 5 million consumers that are still on the sidelines wanting to purchase a vehicle. So that's number one. Number two, if you look at kind of a 100 basis point increase in the cost of a vehicle, that translates to $15 to $20 a month for a consumer, which is a couple of Starbucks coffee. So we don't see the increase in rates that we're putting in the market really stemming demand, either for vehicles or financing of vehicles. So you got to keep that in mind, it's very different from mortgage and other asset classes. This quarter, that $12.5 billion, putting that 8.5-plus percent yield on positions us really well. These will be some of the most profitable flows that we've seen in recent history. If you think about, we have not changed our buybox. And so as we originate to kind of a 1.4% to 1.6% loss rate, even if you stress that up 50% in losses, we're still talking about a fully loaded return in that 15% to 20-plus percent range, Jason. So I feel great about the opportunities that we're seeing. And it really comes down to our model, which we always say we've been in this business for over 100 years. We have a rich dealer network that we've cultivated over time. Many of our dealer relationships have, in fact, been with us for several decades. We have a few that even go back over 100 years with us. We've invested in this space. We've talked about the $1 billion in technology. We have 4,000 employees in our Auto business. So we're able to provide that unique blend of technology as well as human touch to allow us to automate approvals but also close contracts with our dealers in a very efficient, effective manner. And again, we have that full product suite. So a lot of competitive advantages that we have, and we call this kind of our strategic moat that's been really important in continuing to find these flows. And then last but not least, there's a strategic advantage here in that most of our competitors, as we just talked about, are in that super prime space, and we're playing in prime, and that's outside the risk appetite of a lot of traditional players. We love that. It gives us access to a lot of dealers, a lot of flows and quite frankly, it positions us really well, Jason, to continue to win in the asset class.

So I can't do the math that quickly, but it feels like it's like almost like 100% asset beta on the auto-lending side. I guess it is...

95%, pretty good, Jason.

There you go. I guess, with the Fed expected to continue to hike, I mean, just how do you think about that kind of going forward?

Yes. I mean, look, 95% or close to 100% beta is not what we would model. We've been very pleased with the fact that we've put about 215 basis points into the market. But that isn't something we're going to rely on as we go forward. We would expect that to migrate down over time. Last tightening cycle is something in the 50% to 60%. I think there's an opportunity to outperform that, but we certainly wouldn't expect 100% beta over time. But we talked a lot about the origination yield. I do want to make a point that the portfolio yield is going to migrate up as a result of that. And we were at 6.8% portfolio yield in the second quarter. That's going to come through that 7%. I know many of you out there have been asking when are we getting to 7%, we're going to get 7% last half of this year. And as a result of the pricing power that we have, but also our hedge is moving into the money, it will add about 7 basis points of NIM in 2022 and be accretive about, call it, $0.5 billion between now and the end of 2023.

Got it. Why don't we go to the next ARS question? What is your biggest factor preventing you from increasing your initiating position in Ally? I think, Jenn, I think I know the answer. So I'm going to go ahead and -- it is credit. So let's go there. We are seeing kind of normalization -- beginning of normalization of charge-offs and delinquencies, particularly in kind of lower FICO cohorts. You talked about, I guess, performance has kind of matched your expectations. But maybe talk more grandly in terms of what you're seeing? You've talked to this 1.4% to 1.6% kind of range for retail auto net charge-offs. Your thoughts on kind of what that path to get there looks like? And if you could speak to how you just think about the loan loss reserve in that construct?

Yes, sure. And I mean, Ally starts with the health of the consumer. And I'm sure you've heard over the last couple of days, the consumer continues to be healthy. When we look in our savings, balance sheet, even the lowest-income consumers, their balances with us are still up 18% from pre-pandemic. So we're still seeing kind of across our deposit business, a healthy consumer balance sheet. Obviously, labor markets are still tight and providing ample employment opportunities, which is typically the biggest indicator of credit risk in our business. But overall, consumer is still performing well. In that context, we're still expecting normalization. We wouldn't expect to, over time, to be operating at this trough. You saw that in the second quarter. Delinquencies are starting to migrate up. Third quarter, we're seeing many of the same trends, again, all within expectations and still trending below 2019. But quite frankly, we were expecting normalization and that is occurring. On the severity side, I see used car prices is also a factor here. Look, we are monitoring severity risk very closely. We've been on top of this for 2 years now. I mean looking at potential severity scenarios and making sure that we get priced for that as we're originating. And keep in mind that the severity will materialize on a lag. So you think about the vehicles that were originated at that peak, they have to season before that will materialize. But we're watching that exceptionally closely. And then, Jason, to your question on NCOs, this is all baked into our NCO guide. So no changes to that. We have been guiding towards kind of under 1% in retail auto loss rates this year, migrating up to more normalized 1.4% to 1.6% as we get into 2023. So it's all baked in. We're obviously managing it incredibly carefully, not only through servicing activities and strategies, but also through our reserve. We've continued to hold about 20 basis points higher reserve in retail auto versus CECL day 1, and that's because of some of the qualitative uncertainty factors that we've continued to hold in our reserve. And as you know, we have a conservative approach on the quantitative approach that we have in our reserves. And then last but not least, I think really important on this is those investments that we've talked about in technology are making a huge difference as we think about payment rates. About 70% of our consumers are delinquent, we are interacting with digitally. These are tools we didn't have through the '08, '09 cycle. And we're finding that the receptivity and the response rates from digital treatments in our servicing areas, it's been very effective to keep those payment rates up. So feel really good about that. And then as we went through COVID, we didn't let our servicing teams go, knowing that when we needed servicing staff, they weren't going to be available, and that has served us incredibly well as we started to see that normalization to have both the human capital and the technology to manage our payment rate appropriately.

Got it. And maybe shifting gears to the deposits. You talked before that you expect online savings rates to be lower at every point in the Fed curve -- this cycle versus last cycle. You also talked about kind of lagging the competition for longer, and from what we tracked with peers that both have been true. Just how do you think about the strategy going forward?

Yes. I mean, look, we have a lot of experience in digital deposit gathering. I mean if you look over time, we have 13 years of deposit vintages that have been stable or grown. We know how to gather and retain deposit balances. In fact, our customer retention rate is 96%, and our customer satisfaction scores are 90-plus percent. So we continue to have a very experienced and robust deposit platform. I don't think we've ever felt stronger about just the strength of that platform. As we head into what are incredibly unusual times, I mean, if you think about Fed funds increased to 250 this cycle in 1,000 less days than last cycle. Took about 1,100 days to get to 250 last cycle, it took just over 100 -- about 130 days to get there this cycle. So the implication of that is the consumer has not fully awakened to the value that is created by moving your money from a traditional bank that's paying 5, 10 basis points to one that's paying over 200 basis points. It is a material value for our consumers. And we just haven't had time to see that consumer behavior change. But we are confident that's going to happen. And once we got through some of the painful tax outflows in the second quarter, we've seen positive deposit flows every single month, starting June and all the way through the third quarter. So positive flows, feel good about the growth trajectory from here. But we're just -- we're managing, Jason, in very unusual times. I will say beta is going to depend a bit on kind of how fast and what level Fed funds gets to, but we are confident, as you just pointed out that at every point on the Fed funds, we'll be able to pay a lower rate this time versus last time. We feel really good about our ability to balance competing priorities that great rate for our customers, keeping in line with the competitors and also appropriately managing NIM. And I think we've done that through the last decade, and we're confident we can continue to do that moving forward.

So deposits up in the third quarter?

Deposits will have positive flows in the third quarter. And I don't want to -- I also don't want to underestimate the investments that we've made in technology and in brand in this space. It does matter. My CMO tells us we have the most loved brand, I look at that and I say, "Well, what's your awareness and what's your consideration? Is that translating into business value?" And we've seen our consideration rates up some 20% just on a year-over-year basis. So that's helping as well.

Got it. Maybe go to the next ARS question. Ally's management team is confident in this statable upper 3s NIM over the medium term, but there could be some near-term pressure, given the pace of management's actions. Where do you think 2023 NIM will land? I guess, Jenn, as the audience response, this is something that does get debated in the investment community. I think on the earnings call, you talked about upper 3s, 3.5%, 3.7% or so. But obviously, it could bounce around. So maybe just talk to where you see that in the medium term, where you see that longer term? And just given the base what the Fed is going to do or expected to do, just how you feel about that?

Yes, sure. So as we take a step back and we think about the NIM, it's important to understand the why behind it. We see a really nice opportunity for asset yields to continue to grow. And we talked about and we're now putting retail auto on the books at 8-plus percent. We've shifted the mix to be more retail versus commercial assets, that also helps with the yield. We've added high yield, high return, unsecured to our balance sheet. And quite frankly, we have $25 billion in floating rate assets across corporate finance and across commercial as well. So we have a lot of tailwinds as we think about that asset yield migrating up. And I do want to just also reiterate the point around the hedge. We've essentially taken 25% of our retail auto book and flipped it from fixed rate to floating rate. And that's another large tailwind that we'll see. And I mentioned the $0.5 billion we have in momentum on the asset yield. And then we talked about the beta on the deposit side, we think that will be well contained. But as you take a step back and you look at that, over time, especially as interest rates flatten out or start to come down, we would expect the asset yield to catch up to the liability yield. And it's just a matter of the timing on the balance sheet, obviously, with a large liquid savings portfolio, that's going to reprice up a little bit. So in the near term, as Fed funds goes up and deposit pricing goes up, we could see some compression on NIM. I talked about the 3.7%. It could be modestly below that for a couple of quarters as again, that asset yield catches up to the liability yield through time. But I think the important point here is to focus on the medium term, focus on where we're going longer term. And again, that's structurally improved because of all the changes we've made across our business and our balance sheet.

So I guess, modestly below 3.7%. I guess if you look at this slide, it looks like the majority of people think below 3.5%.

Yes. I'd be curious what their Fed funds forecast is. I'm using the forward curve as it sits today. I don't know what curve you're using. But against the forwards, we see kind of modestly below 3.7%. Obviously, this is all rate dependent.

And just maybe turning to consumer banking. Ally has done a lot, I think, to transform itself from kind of what was kind of just simply a deposit app to kind of newer products. Maybe just kind of update us in terms of where you are on that strategy.

Yes, sure. I mean, our strategy across the consumer bank is to continue to grow and scale accretively for the company. And when you kind of narrow it down, we're focused on that customer growth, but we want quality customers. And if you think about just in the 4 walls of our deposit business, we've added a lot of digital engagement tools and about 1/3 of our deposit customers have what we call savings toolkits, which allows them to creatively save for very important moments and assets that they want to acquire. That 30% of our customer base has about 2.5x the balances of our total deposit base, and it also has much lower attrition risk, much lower attrition, some 50% lower attrition. And so we feel really good about the digital capabilities driving that engagement and also that customer value. In addition to that, we're focused on multiproduct customers as we continue to build additional business off of our deposit base, we significantly lower the cost to acquire and can efficiently and effectively scale up invest, scale up mortgage. In fact, 70% of our invest customers come from our deposit business, about 40% of our mortgage business comes from the deposit business. If you think about in-consumer lending and consumer banking, that's one of your highest cost of goods sold. It's that acquisition cost. We've been able to continue to bring that down. If you take a step back and you look at multiproduct customers, we've grown them from 0% to nearly 10% in 5 to 6 years, right? Most banks, traditional banks run around 20% to 30%. We think there's a huge opportunity for us to continue to scale those multiproduct customers and to continue to drive that engagement and that value for Ally. This is showing up in our financials. If you look at some of the newer products we've added our point-of-sale unsecured products as well as our credit card products. They're about $3 billion today, grown from almost nothing just a couple of years ago, and we see a really strong path of growth and accretive returns across those 2 businesses. So we feel really good about it. It's a reflection of our strong brand that I mentioned, the continued investment in digital capabilities, which really bring our value to life.

Got it. And maybe just tying together like the whole balance sheet picture. I think loan lease growth was up about 15% or so in the second quarter.

Yes.

You talked about growing the balance sheet to $200 billion area. Maybe just talk about kind of overall growth expectations going forward.

Yes. I mean I hit on a lot of this already, but I mean, retail auto is clearly growing again in that prime segment. Commercial is interesting. The team would tell me we're seeing kind of low-to-no growth. Supply chains continue to be constrained, coupled with strong demand for vehicles is keeping inventory levels down. Inventory levels are running about 30% of -- from pre-pandemic levels. And we don't see that growing quickly. It will grow at some point, but likely not too much in the foreseeable future. You shift to our unsecured products. Our credit card product has been growing at a 60% CAGR since 5, 6 years ago. That's not slowing down, continue to see really strong growth there. And we haven't even started to tap our consumer bank for credit card growth. That's another big opportunity for us. And then unsecured point of sale, we're seeing a lot of robust opportunity in the home improvement vertical. It's become -- it was a very small percent of our business about 2 years ago. It's now grown to over 50% of our originations. We'll have about $600 million in originations just in our unsecured business this quarter. So that's scaling up really nicely. And then Corporate Finance is a business that maybe doesn't get a lot of attention, but it's a steady earner. Every year, we get our 20% plus return from Corporate Finance. We have a very niche area that we play, and that business is going to eclipse at $8 billion to $10 billion guide that I've been providing for some time. So it will be at kind of over $8.5 billion, and we're seeing a clear path to grow that $10-plus billion. And in particular, our asset-based lending business is really growing very, very nicely in this environment. So really seeing growth across all portfolios, except, I would say, commercial floor plan is a little bit slower pace and mortgage as well. I mean, that's a business that is very market-dependent. We don't chase growth. We have high hurdle rates, we hold that business too. So the mortgage originations are coming down at time this year as well.

Makes sense. I guess, Jenn, you mentioned buying back 35% of the stock. You mentioned dividend increases, yet you're still at 9.5% CET1, above your 9% target. You guys were the clear winners in the stress test with the LTV coming down 100 basis points, everyone else was kind of flat to higher. I mean you talked to buying back $2 billion worth of stock this year. Is that kind of still the plan? And then just maybe bigger picture, how do you think about capital return next year and the year after?

Yes, sure. I mean, look, we have a very strong capital position, and that was reflected in the SCB. So thank you for noting that, Jason. I mean, we have about $1 billion in excess capital. We have been very thoughtful on distributing that capital and really balancing capital distribution across strategic investments to drive accretive growth. I talked about shifting our capital allocation into a much more profitable lending segments. We've grown our balance sheet to $35 billion in the last 5 years. 6x-ed the growth in our diversified portfolios, and inside of that, also grown our retail auto $17 billion. So just done, I think, a really thoughtful job in making sure that we're allocating strategic capital to the right areas of the balance sheet. Coupled with that, we've distributed over $8 billion. Share repurchases have been attractive, especially when you trade at 5x earnings. So we'll continue to have a robust capital -- share repurchase strategy. We are, Jason, still on pace for that $2 billion this year. And if you look at $2 billion last year and $2 billion this year, we were working through a lot of the excess capital we generated through strong earnings in COVID. We'd expect to have kind of the same allocation. But of course, as we've worked through that excess capital, the note the share number will come down a bit as we think about '23 and beyond. But still feel really good about both strategic growth as well as continuing to have a robust repurchase program and to pay a competitive dividend. I'd also mention we get some questions about TCE to TA. Keep in mind as a Category 4 bank, total capital does not run through our regulatory ratios. We feel really good about loss absorption capacity, especially if you think about ALLL plus total capital, it's $13-plus billion that we haven't lost absorption capacity. And the OCI marks that we're taking are not economic. Those bonds will accrete to par over time. We have every confidence in that. And our securities portfolio, which we also look at very carefully in terms of capital allocation, has been 100 basis points accretive on ROTCE. So in spite of kind of the temporary marks we're seeing in OCI that are bringing book value down, we still feel, economically, we are doing the right thing, allocating capital to the right place, and it will position us very well for the medium and long term, Jason.

Got it. I see the clock ticking. But we've touched on a lot of the key drivers, but 2 weeks to go in the quarter, any other insights you want to share?

Yes. Look, I mean, operationally, still executing, and that's -- look at our track record, we focus on the controllables, we focus on delivering for every one of our constituents that differentiated value. And that's going to show up here again in the third quarter. We'll have robust retail auto originations. I mentioned the $12.5 billion at over 8.5% yields. We're going to have positive deposit flows, which is encouraging to us. We'll have growth across our newer businesses, we'll have customer growth. So operationally, a really strong quarter. I do want to remind everybody when you have a good origination quarter, what happens? We get CECL reserves. So I just want everybody to understand is we're growing our portfolio, there will be some CECL reserve math included in that. But again, we're managing the company for the long term, and we feel good about how we're allocating that capital. And then just on expenses, look, we have had elevated expense growth this year because we are bringing in Fair Square Financial for the first time. And as we roll forward into next year, we'd expect to see more kind of that single upper-digit expense growth. That's -- if you ex Fair Square out, our trajectory on expenses is very similar to what you've seen in the past. And again, we're going to be really careful on how we deploy those investments in technology and brand and strategic opportunities for accretive growth in the future. But we're still running through the models on allowance and coverage rates, so still working through that, Jason. But what I'd say for third quarter from an operating perspective, it's still a strong one.

Why won't we put up the last ARS question? Which of the following do you think is the most attractive part of the Ally's investment thesis? And Jenn, in closing, you mentioned 5x earnings. Against the backdrop of what you think is a 16% to 18% plus ROTCE over time, so just maybe talk to what do you think maybe part of the investment thesis is kind of misunderstood?

Yes. I mean, look, we're unique, take some extra work, extra effort to really understand where we drive value, where we're differentiated. And I just think that, that is something that we continue to tell the story, continue to put good numbers up. I think just take auto by way of example, that was an area where people were focused on super prime. We're in prime. So it just -- it takes a little more extra work, a little effort to understand us. And we're still relatively new. Look, we've been a public company for 8 years. So we're still a bit of a show-me story. But our strategy is focused on the controllables, continue to execute. And I'd refer you all to our actuals over the last 8 years and look at what we've done. We're going to continue to focus on what we do best, focus on execution, controlling what we can, and we're confident based on the transformation that we've driven that we'll get there over time. So we don't worry too much about it. We know it will happen over time, and we're confident in that trajectory, Jason. Thank you.

Great. And on that note, please join me in thanking Jenn for her time today. And next up is M&T.