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

Great. Well, thanks, everybody, for coming. We've got a nice, packed room here. Up next, we're excited to have Ally Financial joining us once again. Ally has continued to execute on its strategy of being a leading direct bank, generating best-in-class growth within the order market. Here to tell us more about the plan ahead is CEO, Jeff Brown. Today's presentation is going to be a fireside chat.

So J.B., maybe just to kick it off. So Ally has strategically evolved over many years from a monoline auto lender to a more profitable, diversified consumer finance company with a strong culture. That said, the world is obviously vastly different today relative to when we were on stage here a year ago. So to what extent have changes in the macro altered Ally's strategic priorities?

Okay. A long one there. Well, good morning, everyone. Thank you very much for being here. Appreciate it. [Audio Gap] Just thank you because I would say while we have gone through an incredible multiyear transformation, some of the points listed on the slide of blood view, I would still say straight up the single thing I'm most proud of in the company is how our cultures evolve during about 8 years of me serving as CEO. But obviously, to your point, the world looks a heck of a lot different than it did a year ago. And I remember at the time, and I had served on our Federal Advisory Council with Chair Powell and [indiscernible] was around 25 basis points of tightening to be seen over the course of 2022 and the beginning of quantitative tapering and relative to what has happened has been quite historic. And so how does all that ultimately impact the business? One of the things I'd say is strategically, I think the long-term strategy is still very much intact. The 5 or 6 core priorities that we serve as an institution around continuing to grow shareholder value, continue to prudently managing and accepting risks, growing our culture, strengthening returns, all that remains in place. But obviously, you're very mindful of this is a very different environment. I don't think any of us would have projected, but the Fed had to tighten as much. And hopefully, we're getting towards the tail end of that tightening cycle. And so we've got to be ever more prudent and balanced in the way we manage risk. And we certainly recognize the consumer is going to have a tougher time navigating 2023, that's going to impact our businesses. But I think our core priorities and starting with auto, first and foremost, is auto has really been -- while it's a 100-year-old business for us, we continue to optimize the business. And I say all the time, our Head of Auto has been with the company for 35 years. He runs it like a start-up. Every single day is a new opportunity to try to reposition and recapture the business. And Doug Timmerman has done a fantastic job. Obviously, 23,000 dealer relationships. We see a lot of application flow. But that enables us to really pick and choose where we want to buy and book business or not. And so Auto has been really the story of continuing to optimize. And with respect to the Bank, obviously, deposits as the big gateway product, the big entry product into Ally Bank. We've got about $137 billion of retail deposits today. That provides very stable cost-efficient source of funds for us, but we started to use the entry of those customers into being able to market them other things like Ally Invest. You see great cross penetration there, Ally Credit card, Ally Lending as well. And so the bank has been more the growth story. Auto has been more optimizing, but I think we're, again, very cognizant of a tougher environment out there.

Got it. So if you think about the environment, Ally has generated strong growth in virtually all asset classes. I think you've noted roughly $48 billion of consumer originations in '22 and several billion lower next year. Now despite the strong risk-adjusted returns, there is some pushback on growth given the uncertainty in the environment. Can you maybe just talk about what is giving you the comfort to originate at these type of levels? And what is really driving it?

I mean, it starts with, obviously, every recession or every tough environment is going to be different than the last. So we don't think at 2023 is going to pan out specifically like we've seen in prior recessions or prior tough conditions. And our call is more of a soft landing to a mid-landing. But I think for us, we're going to be somewhere in the neighborhood of $47 billion to $48 billion of originations. And what often gets lost in that really big headline number of the amount of paper that we see, is really the segment analysis, the micro segment analysis, the detailed credit analysis that goes on behind the scenes. I mean, ultimately, our application flow. We approved only about 35% of what we see. So -- and that's by design. We don't like the paper that's out there. So if we wanted to, your flow could be well in excess of $100 billion. You pulled back way back on what you ultimately book. And I think we've been more prudent than probably the market realizes over the course of the past 6 months. You'll see that probably even more so in the fourth quarter as we've continued to do segment analysis continued pull back there. But net-net, we feel really, really good about the paper we're booking. Keep in mind, too, if you just assume a 9% capital rate, okay. New auto yields right now are coming on at 10%. We will be 950 plus on average for newly originated paper in the fourth quarter. Frankly, Ryan, we've been surprised you and I talked about that up on stage a year ago. Loss rate, we're assuming a 1.6 loss rate, even if that got into a hard landing closer to 2, you're still talking about very dramatic ROEs. Baseline ROE of paper that we are originating today is 37%. Stressed meaning you take losses up 50% higher, you take your cost of funds 100% higher than what we're assuming, you get a 22% ROE. The paper we are putting on right now is historically the most profitable. And so you always have to factor in. We're mindful of the risks that are out there, but you always have to counter that with what you're doing in terms of getting compensated for taking that risk. And again, yields on the auto paper very attractive, and you can scale that across the unsecured in the commercial finance business as well, and it's very attractive paper that we're booking today. But obviously, for us, other things that factor into your credit decision, what's your coverage. We're running pretty robust coverage, particularly in auto. It's north of 355 and COVID, that spiked up to 409 could you see coverage dip. It could if you saw really harder recessionary conditions come to life, but where coverage is robust today. And then in terms of servicing side as we continue to position staff people, roll out digital capabilities for servicing. So you have to think of not just the paper you're originating, but how you service that over the life of the loan. And we feel really good about what we're doing today.

So a lot in there, J.B. So I'm going to try to dig into some of these topics. So -- there's obviously been lots of commentary on the auto market, but you recently noted the scale of the market and how competition varies greatly depending on where you look. Ally is a full spectrum lender. But you tend to focus on what you call the belly of the curve. Maybe just talk a little bit about what you're seeing competitively with respect to underwriting. You referenced earlier pulling back on the originations. Talk about maybe where you're tightening. And you really talked about how as Ally differentiate itself from some of the competitors?

Sure. So when we say belly of the curve, what do we really mean? Prime lending, used car lending, that's the space we like. And part of that was a very deliberate shift we made 6 or 7 years ago. And so it's -- the prime market is still a very fragmented market. There are 2 really large competitors in that space as us and CapOne candidly. And I think we both are very rational and respect to each other and how we perform in the markets. What you've seen taking a macro of the step back is really, let me start with the super prime space. So typically, what you see the large banks play there, it's 0 loss, but it's a much lower return. But again, it's effectively 0 loss business. You also saw the -- you see the credit unions play in that space. What has transpired over the course of this year is credit unions up until recently really had not moved price. And so obviously, the big banks that play there were not capturing any volume. All paper was going to the credit unions, and we can argue all the reasons why. We don't think that was prudent decisioning now the credit unions. But again, they switch sort of posturing recently, but the big banks that often talk about playing in auto basically saw no flow there. Then you take the other end of the spectrum in the subprime lending space. For us, this is about 9%, 10% of the business we do. And you basically -- that normally represents about 25% of the overall originated universe in any given quarter. There is simply a lack of available vehicles at $25,000 and $20,000 and below. And so that universe has effectively shrunk down to about 17%. So part of the reason you see less volume through the subprime segment is simply a function of lack of inventory. The price space is still very large, very fragmented and represents a huge opportunity. And again, for us, that's a space we like. That's the space we can get the most risk-adjusted returns. And so we're still very comfortable there. And then in terms of the risk that we're taking today and what have we done in some of the specifics, I'd say, obviously, mindful of FICO, and there's a lot of people that think FICOs today are overstated. In fact, with all the stimulus that occurred. So it's not just from a FICO perspective, but LTV, DTI, PTI, we look at all of that. And the other thing is, I think in the fourth quarter, you'll see us be slightly higher in our percentage of new business relative to used business as we -- again, as we've been really paring back or trimming some risk on the tails of the past sort of 6 months or so.

So maybe to build on that a little bit, when I look at the slide that you have up here, lots of different things you've accomplished. Can you maybe just talk about the dealer strategy within auto. We know that you have a big presence with 23,000 dealers, 13 million applications, which is up meaningfully. In addition, you've established relationship with some disruptors like Carvana and the like. How do you think about the mix of business between the traditional indirect channel and the direct?

Yes. So again, part of our strategy and our pivot years ago, many, many years ago, we shift from this kind of OEM, all contractual business. It was all new in business to actually going out and having to hunt. So we grew our dealer universe. This stat used to be kind of 16,000 dealers. Now it's up to 23,000, and that's part of a very deliberate focus with our sales force. We have about 4,000 people that work in auto to buy out and find more dealers penetrate more, if you're only getting 5 contract a month, why aren't you getting 10, why aren't you getting 20 and really continuing to press there. And so -- we've done a great job of really scaling up and again, seeing more applications. That's another big ship. We used to be very selective. Dealers send us only what you think we will buy. That -- there is so much power in the data that we shifted that show us every application. And so again, you see 13 million applications that has risen considerably every single year, and it allows us to be more focused on where we buy and what we buy. And then these emerging players like Carvana, EchoPark, Room and others that are out there, it's largely where a lot of consumers wanted to shift. And certainly, in the case of Carvana, they had this big COVID benefit, where you saw sales skyrocket through them, you saw their equity price skyrocket. For us, we're a little agnostic on where we book the paper and I'll come back to Carvana in more in detail in a second. But for us, it's all about the credit performance, the right risk return. And so it doesn't matter for us, specifically around if we're buying the paper through Carvana or one of these digital players versus if we're buying it through the traditional dealers, provided the credit performance remains as expected, and it has -- to date, it has. And keep in mind with Carvana, when a consumer buys a car and finances a car through them, that's kind of the end of their journey. The traditional model, they often rely back, go back to the dealer, get the car serviced, Carvana does not offer that. And so for us, provided the paper is performing, they're still a really good partner. Now again, I think their business model has been challenged by higher cost of everything. Trying to -- a higher cost of moving cars to where demand is, higher cost for people, higher cost for building their facilities. And so Obviously, again, Ernie has -- Ernie Garcia had this tremendous run-up during COVID, and now there's been a reckoning in light of fears around auto lending and auto finance and all these things. But we're in weekly, daily dialogue with Ernie and his team. We think he's a great operator. Obviously, the retail book, we don't look at having any incremental risk of that paper relative to what we do through our 23,000 other dealers. And then we also have a $2 billion line out, that's all against Vince. It's all against cars. We don't lend against their real estate. We don't lend against their buildings that they have in place today. So unless there was fraud, which we don't believe. Ernie runs a very good shop, very clean shop. And I think he's managing through the profit side right now. So we look at them as a very reasonable responsible partner. And again, back to complement my head of autos, he's been very successful in managing that channel conflict. That used to be a big conversation we'd have about, Doug, how are you going to manage this relationship with your traditional dealers and how are you going to manage the relationship. Dealers have all understood there's a place for them all. And we've done a really good job in managing through that.

And I believe you have $2 billion. I believe the line drawn is actually much lower.

Yes, it's about -- it's around roughly 25% today. And so -- but again, we're in very frequent conversations with Ernie, but good operator, and we have a high degree of confidence, but he's got a great model and he'll get through this.

You talked about the level of price that you've been able to put in the market. You talked about 10%. Can you maybe just talk about how you've been able to push through this much price without altering your risk profile? Or has the credit profile changed at all? And give us some data to maybe back that up.

Yes. I mean, frankly, this has been a positive surprise. And I mean you and I talked a year ago about some of this about where we thought we could see auto yields rising. Frankly, I've been surprised that the market has taken all the price that we put in. But part of that's us being prudent trying to press there in that regard. I think we're probably close to hitting a sort of saturation point where maybe consumers sort of say, okay, I'm at a 10% yield for -- paying 10% on a car loan. I think I'm kind of getting close to hitting the wall. So again, our view, our house case is what the Fed is getting closer to being done than having way more to go. That could change if inflation roars. But we think we're through the vast majority of this. And so we think another -- a 50% beta from here probably makes sense in auto. We're north of 100% today. But again, we've been sort of pleasantly surprised at we haven't had to alter. And again, Ryan, I'd just tell you, if anything, we've done on credit, it's been tightening credit conditions. And again, I think that gets lost when the market sees the big numbers and sees that Ally continues to lean in and here's other lenders that are backing out, it's back to the structural things we talk about we have continued to tighten credit performance along the way and continue to staff in a big way on the collection side. So we feel pretty comfortable with what we're doing.

And maybe just on that point on credit, historically, you talked about $1.4 billion to $1.6 billion. Due to some factors you're now talking about $1.6 billion. Can you maybe just help people understand what led to this increase in assuming a lot of this mix shift within the portfolio as opposed to actual credit deterioration? And maybe what gives you the confidence that it's not going to drift higher from there?

Yes. And great question. So we try to really go through this in the third quarter earnings release, and there is a page in there. I'm sure we'll continue to talk about it in January, the fourth quarter as well. But for us, when we look at kind of where we're originating today, and in light of current conditions, we see us being more on the upper end. We don't want investors and analysts to be thinking we were on the lower end of that $1.4 billion to $1.6 billion range. It's clearly on the higher end today. But what we see relative to 2019 is about 30 basis points incremental risk for 100 basis points more incremental yield. And so it is very compelling in what we're doing. So if we hit a hard landing, let's say, where could losses go, could you end up in the approaching $2 billion, low $2 billion? Yes, you could be there. We think that would be a quarter or $2 billion versus some long-term sustained period of time. But we feel that we are very adequately covered there. We've got robust reserves. And we feel like we've got the right people to be able to manage through this. The other thing, Ryan, a lot of what we tactically do too is delinquencies, and we look at kind of how delinquencies bounce and that can give you one view. We also very focused on flow to loss. And despite delinquencies bouncing, whether you're looking at 30-day, 60-day, 90-day, flow to loss has actually been materially outperforming even relative to 2019. So all this comes back give us confidence on the credit that we're putting on the books today.

So a lot of what you talked about on credit really impacts the frequency of loss. One topic that I think we've all been death has been on the severity of loss, particularly regarding used car prices. And used car prices up on, I would say, relatively in line with what you guys have been expected. And I think you were expecting them to continue to go down. Can you maybe just remind everybody what is assumed for the values and you underwrite to this over the next few years?

Yes. So a year ago, some end of last year, we said we recognize you used car prices were very high, running hot. And we had embedded in all of our models, a 30% decline over the course of 2 years. you're basically this year, you've had some ebbs and flows. I think we were running closer to 15%. Probably the interesting thing. The auction markets the past 30, 45 days that we can just touch. So I think you're going to end the year probably used car prices, and there's a variety of different of names that are out there to predict. But you're going to be somewhere in probably the 17%, 18% decline in used car prices. So we still think the endpoint, you're going to see another 15% decline next year. Why isn't it more? I think that's the other question that's out there. There's still structural demand for vehicles back to. There hasn't been in the subprime space, there hasn't been the lower-priced vehicles available. Rental car companies have struggled to buy any cars. Yes, you're starting to see new car inventory improve, but it is extremely gradual. And unfortunately, Ukraine made a number of the harnesses for all the -- a lot of the foreign manufacturers, a lot of that stuff we finance. And so a lot of the foreign OEMs are still very much constrained. So we think all of these things continue to provide a lot of structural support for used car prices where obviously, we continue to believe they will gradually come down. But all of that is factored in the way we price and manage the risk.

So you gave us a lot of different data points regarding stress performance in terms of where losses can go, you talked about the allowance of that maybe you could go back to where it was during the pandemic. The markets are obviously very worried about a recession. Can you maybe just talk about strategically how you've prepared for a potential downturn what things have you put in place? Do you think the market maybe doesn't appreciate as much and what that can mean for performance if we do hit -- this downturn that I think most think is inevitable.

Yes. So again, price for the risk. I mean, I think that you start there. You've putting on 10% new paper, you've got adequate buffer for incremental losses and incremental stress. Number two, kept all of our people. So during COVID, we built up our servicing and collections force rolled out a number of digital capabilities and self-management tools for consumers that have used the enhance all the text reach capabilities, all those things that you would have wanted us to do have remained in place. And so we did not slow down. Once the environment kind of slowed and the losses were effectively close to 0 over the last year. We kept our people. We kept investing in the capabilities, and so we think we're going to be well positioned. Whenever we underwrite a loan, we are underwriting to the core belief that consumers or borrowers willingness and ability to pay. And so we've got all the capabilities in place today that we think we'll be able to manage through this. And again, I'd say a couple of things with respect to the stress scenario that's out there. Obviously, the Fed put us through a very onerous and much higher loss content. And we believe we performed very well on that this year. Our SCB came down 100 basis points. That was a great thing. We're running kind of 9%-ish capital levels inside the house. So yes, there could be things like could you see coverage having to build back to 4%, if we really hit a hard, hard landing and unemployment spike, that could happen. But again, I think for the most part, we think we're going to be able to very successfully manage through this. The other thing, the interesting dynamic we're facing is you could see more of the soft landing or harder conditions coming next year, even if unemployment doesn't change, where you still see an extraordinarily strong labor market in place today, but consumers are struggling with just the higher cost of higher inflation, higher cost of everything.

In your opening remarks, you talked about building out deposits and some of the other products. We returned to growth this past quarter on the deposit side after some tax outflows. But there's clearly concerns in the market regarding rates paid. So maybe just talk strategically what you're doing in the deposits business. And then how are you thinking about growth? And how are you balancing growth versus rate paid? And what are your expectations for the beta from there [indiscernible].

Sure. So deposits have been obviously a great growth story. You see it on the chart. We're #1 in all digital bank that's out there. We'll end the year at $137 billion of retail deposits. That's going to be up a couple of billion, frankly, we would have thought it would have been more sitting here a year ago, but the market has been hypercompetitive. And then in second quarter, we and others experienced large outflows to the United States Treasury Department paying taxes from the prior year. And so that was about around a $5 billion hit for us. But we grew in the third quarter. We're growing in the fourth quarter. We have a 96% retention rate on our retail deposit book. I challenge any bank to show us something better than that. And so -- and that's over a long history of really since the bank started back in 2010. We continue to see growth from both our existing customers and new customers. And so that's very powerful that you're getting it both ways. And again, we think deposits really serve as the gateway product. And so -- for us, though, we have a variety of funding sources. You can use the brokered market, which has come back in vogue. You can use FHLB. The securitization market is still holding up quite well. So we don't have to go out and aggressively price deposits. We want to be not the #1 price leader, and we're not. Our OSA, our online savings account today, which represents about 70% of our deposit book is paying a rate of 3%. There are other competitors that are out there north of 350. And we have to be mindful and watch that. We have to look at the names. But I think we balance that in light of a very dynamic ALCO process and what other sources of funds do we have available to us. But we like deposits. We like the deposit business. Di Morais runs that. He has done a fantastic job keeping the customer really at the center and a lot of great technological capabilities, savings capabilities that we think make us less price elastic relative to others. And so it's still very important to us. I think data to date has been in the 65% type of range. We think it will likely end up being 75%. But again, we think we're more on the tail end of the Fed's tightening cycle than just at the onset. So that OSA rate could it get up to kind of 340, 350? Yes. But I think we've seen most of the pressure. I mean we are a liability-sensitive institution. This has been a tough year to navigate through. But I think we positioned about as best as we could have in light of all these things. And then if you start to -- I mean the forwards right now are pricing in 2 eases in 2023. I'm not saying I necessarily agree with that, but I do think the Fed is likely closer to being done and then we'll sit here for some period of time. When you get on the other side of this, when you're talking about the savings book starting to immediately reprice down and you booked all these 10% yielding auto loans, margin expansion is going to be very real. It's just may take you a year or so to get there.

And I definitely look forward to us getting to that point.

You want [indiscernible].

So look, we've covered the biggest drivers of the margin, maybe just to kind of come full circle. How do you currently see the NIM unfolding in the medium term, given the strong pricing on the asset side and what we're pricing? Do you still think roughly 350 bottoming and then eventually coming back to that 370-plus a year out?

Yes. I mean I'd say structurally where I said we're still a 4% in company, and that surprises people when I say that. But if you look at the high-quality assets that we're putting on, you look at our diversified funding, we're still a 4% NIM story. And obviously, we were there. And then this dramatic increase has been a painful year to kind of grind through and keep everyone focused. And so we still think 350 is kind of the right landing spot or low point for us, how long we sit there sort of dependent on what transpires with the Fed and where that goes. But we think that will be about the low point. And we think we've proven our ability to manage through this. And again, we're guiding kind of 50% beta on auto and part of that comes back to that saturation point. But we've proven we've actually way outperformed that. And on deposits, we're guiding at 75% beta, and we've outperformed that as well. So 350 is below, we're calling today, how long we sit there is anyone's guess. But we think once you get to the other side of rates or flattening, you're going to start to see that really accelerate.

Good to hear. So look, Ally has built out a full product suite given the expansion into unsecured lending. You've been building out corporate finance that generates strong returns. You have business like home and investment have fueled growth in multiproduct relationships. How are you balancing growth opportunities at Ally Bank? And what are you doing to ensure that some of these businesses will become larger contributions to the company over time?

Yes. Obviously, with respect to the Corporate Finance business, it's been very gradual growth. We have a very strong operating group that runs at 35-year-old veterans -- 35-year veteran's company, Bill Hall, that's gone from kind of a $6 billion book of business, north of $10 billion book of business. Very low criticized loan, very low loss business. When you have losses, they tend to be a little lumpier, but the names that we are partnering with the servers, KKR, big, large names. And so we like the growth in that space. And then with respect to the other businesses, I mean, Ally Lending right now, that's actually a super prime business for us. It's unsecured lending, and it's largely in the health care and home improvement verticals. It crossed over $2 billion in loans this year. So we feel good about that. Ally Credit card, we acquired Fair Square 1 year ago in December of last year. That's up to about $1.4 billion. That's another unsecured business, very high ROEs in that business as well. And so we feel good about kind of all these things coming together. The one thing that we don't talk about a lot. Obviously, corporate finance, we break out as a separate segment. But if you went back to kind of 2014, the combination of these other businesses contributed about $150 million to earnings. It's 4x at today. And so you're seeing that. When you look at top line revenue growth for Ally, part of that expansion in growth it's yes, it's optimization we've done in auto, but it is -- you are starting to see the contributions of all these other businesses. Obviously, Ally Home, our mortgage business, and we rely -- or we have a partnership model, so we didn't have the big volatility but others have seen. And kind of grinding through this environment. But that's obviously depressed from an earnings perspective right now, but we like our business. We like the position there. And when the mortgage market starts to turn, that will be another contributor. But I think it surprises folks whenever we mentioned that 4x number. But that's part of a look at our growth year-to-year in revenues. We think revenue growth will obviously be more challenged for all these factors we're talking about in 2023, but it's been pretty impressive the increase in revenue growth that we've had out there. And I think that's -- you see the 70-plus percent since 2014.

Maybe a handful of more topics I wanted to get through before we finish here. So -- during 3Q, you provided an operational and financial result expectations for 4Q, including dollar and EPS. Just maybe high level, any changes to what you had laid out for the fourth quarter?

Yes. The headline number, let me start there. I just say the dollar EPS fully intact. So that's not an issue. I think revenue growth is probably running a little better than we expected and losses, maybe just a tick higher. And part of that is just that what I mentioned earlier, Ryan, the last kind of 45 days of a little bit weaker auction prices that has some modest impact to losses. But net-net, the story we communicated out in the third quarter remains fully intact and will deliver.

And then I know we're going to get some official guidance in January, but you talked on the earnings call about various moving pieces, margin, credit. When you put it all together, you're talking about somewhere around the 12% return in '23. Maybe just talk a little bit about what are the pieces to get there? And what would you say to an investor who thinks that full annual -- fully normalized returns will be anchored to that 12% level relative to some of the levels that you guys have talked about?

Yes. I mean look, we're structurally a very different company than we were back in 2015, '16, '17, '18, '19, and even relative to COVID. And so you've got some strong embedded tailwinds. Yes, we recognized as a liability-sensitive company, this has been a challenge to grind through the amount of Fed tightenings that we've had in front of us. But in terms of operational execution, it's been extraordinarily sound. I'm very proud of what the teams have continued to do in sort of seen past the current cycle be mindful of all the things you're doing. But we see ourselves still being in this kind of 12%-ish range. But -- last year, I think we showed kind of a through-the-cycle view of 15%, 16%. I would say, we -- that guidance is fully still intact. How quickly we ultimately get there and realize is a bit of anyone's guess. And that comes back to what transpires in the rate environment, to some degree, what transpires in terms of credit, but we feel well positioned on credit. I think the rates is the bigger unknown. We just -- we want to believe the Fed is approaching a spot. But if inflation keeps roaring, could we see the Fed pause at 5% for a while and then start tightening again, that is not out of the [indiscernible] possibilities. And so that has to get balanced in how fast we think we're going to get to the other side and start to see returns back north of 15-plus percent.

Maybe one last one for me on capital allocation. So you recently materially slowed buybacks given a desire to be prudent considering everything we just talked about here. However, the current stock price represents a compelling return, the 60% ex AOCI on tangible. How are you viewing capital allocation in the near term? And just things like TC at all impact the way you think about capital allocation?

Yes. So a great question. So first, I mean, when I think back, we've been very prudent in overall capital management, and that will continue. When we IPO-ed the company, we had 484 million shares outstanding. We have 298 million shares outstanding today. We have been aggressive buyers of our paper. We recognize it's a risk-free return. It's prudent to do that. We've written up the dividend 7x since its inception. I think as we looked at the environment today, we said it was prudent that we've got through $1.7 billion of our $2 billion buyback program. We said to pause for some period of time. we're obviously balancing in growth. But when you're talking about baseline ROEs in your auto business at 37%, even stress ROEs in your auto business at 22%. Either way, that's pretty attractive even relative to buybacks. But all that goes into a very dynamic process in the way we manage. And then finally, with respect to kind of TC, the -- obviously, we run a securities portfolio as part of broad liquidity management. We did not make a designation to move any of those securities to HTM. They accrete back to par. But you may have a period of -- the duration on that portfolio is about 6.5 years, and so it accretes about $750 million a year back to par. And so we think there's some period of time you have to deal with that book value hit right here. But I don't think it really influences the overall capital management philosophy of the company. We're mindful. You're hearing more regulators ask the question and talk about it, but it really doesn't influence the strategy today.

Great. Well, we're out of time. So please join me in thanking J.B.

Thank you all very much. Thank you.

Thank you.