Ally CFO Jenn LaClair spoke with Staff Reporter Jackie Charniga on 2020 expectations, improving dealer relations and technology updates. Here are edited excerpts.
Q: What elements of 2020 are you feeling most positive about?
A: Strong revenue growth. Retail auto is a very big part of that. We'll continue to see retail auto lending yield expand into 2020 ... across all different manufacturers, all different nameplates, used, new, lease. It'll become about dealer expansion, but also increasing the quality of the dealer relationships and making sure we're really partnering closely with them to help them be successful, but also to improve the app flow per dealer for Ally.
Several analysts are cautioning that higher delinquency rates, particularly for subprime borrowers, could be a concern in 2020. Ally's delinquency rate climbed in the fourth quarter of 2019. Was that change expected?
For the quarter, we were up five or six basis points — all well-anticipated and in line with our portfolio.
Some of the dynamics there ... we've shifted to used originations, and when you are originating used vs. new, you tend to get some higher frequency, but lower severity in terms of the credit-risk profile.
We have been seeing delinquencies tick up over the last 18 to 24 months simply because of the change in mix to used, and the seasoning of the used portfolio.
[Additionally,] we've been augmenting some of our servicing strategies to keep our customers in their vehicles longer and providing them more of an ability to pay. That's been around extending the time frame before we repo ... and that has resulted in slightly higher delinquency levels.
Do you anticipate any changes to your subprime business moving forward?
Our nonprime segment, which is under 620 in FICO, has been very consistent. That's been running 10, 11 percent of the book. And then subprime, which is under 540 FICO, is less than 1 percent. Those metrics have been very consistent over the last several years, and we don't see any sign of that changing.
What other changes have occurred at Ally?
We implemented a new servicing and accounting platform this year. That is the core system for auto finance, and so we converted over 4.5 million accounts. It improves the customer experience, the employee experience is much more adaptable and nimble as we think about growing the business as well as growing feature and function around our servicing capabilities. It was an effort that we've spent years developing, and we're very pleased with the successful implementation in early January.
