Jon Arfstrom: Okay, alright. Thank you.
Operator: Thank you. One moment please for our next question. Alright, and our next question comes from the line of Bill Carcache with Wolfe Research Securities. Please proceed.
Bill Carcache: Thank you. Good morning and good luck JB, wish you the best.
Jeffrey J. Brown: Thank you very much, Bill. I appreciate that.
Bill Carcache: Yes, absolutely. I wanted to follow up on the commentary and all the color you’ve already given on the NIM guidance. And in particular, your outlook for OSA rates. There’s been a debate around the possibility that your OSA rates may continue to face upward pressure and ultimately have to converge with the Fed funds rate. Historically, in a [indiscernible] environment, Ally offered rates above Fed funds. And I guess there’s just concern that, that upward pressure on deposit beta could persist as long as Fed funds continues to exceed the rates that you’re offering. I guess, your thoughts around that and the potential for further offsets from betas on asset yields, would be great?
Russell Hutchinson: Great. Look, we think we’re at the end of the tightening cycle. Assuming that’s true, we do think there’s a possibility that our OSA rates pick up slightly from here. But I do say it’s a possibility. I’d say the trends that we’re seeing in our deposit book have actually been quite favorable. As JB pointed out and as I mentioned during the presentation, we’ve had a really great quarter in terms of attracting new customers. We’re about to have a record year, in fact, in terms of attracting new customers to our platform. We are not the highest payer right now when you look at our liquid deposit rates. But again, we continue to have incredible momentum with our customer base. We’re seeing it in terms of strong retention.
We’re seeing it in terms of customers taking advantage of things like our savings toolkit. And we’re seeing it in terms of new customer growth. And so while, yes, we do think that there’s a possibility that we could tick up on OSA pricing, we think it’s just that. It would be marginal, a marginal uptick. And again, at this point, I would characterize it as a possibility, not a certain outcome.
Bill Carcache: Understood, thank you. That’s helpful. And if I could just follow up on your commentary on capital and the impact of Basel IV end game. Since the inclusion of OCI — AOCI changes introduces volatility into regulatory capital, there’s been some debate around whether this could lead the banks to have to run with a bigger buffer than they have historically. Maybe if you could just speak to any changes to your long-term capital targets or should we continue to expect sort of that 9% range for CET1?
Russell Hutchinson: Yes. Look, I think there are a number of kind of puts and takes into the proposals. There’s obviously a lot of gold plating around certain asset classes. And I would say, look, when I look at our 9% management target now, that’s a full two percentage points north of our regulatory requirement. So right now, we’re sitting at 9.3% at approximately $3.7 billion of excess capital relative to the regulatory minimum. I feel pretty good about where our capital is, and I don’t anticipate any significant changes to how we manage capital going forward.
Bill Carcache: That’s really helpful. Thank you for taking my questions.
Operator: Thank you. One moment please for our next question. Our last question comes from the line of Kevin Barker with Piper Sandler. Please proceed.
Kevin Barker: Great, thanks for taking my questions. JB, best of luck at Hendricks. It’s a pleasure working with you.
Jeffrey J. Brown: Likewise, thank you.
Kevin Barker: Yes, I just wanted to follow up on the NIM conversation. In particular, the projection for over a 4% NIM at some point, it seems like in 2025. Now in your view, given the current rate environment and the additional rules around debt issuance or potentially different Basel III changes, do you expect to achieve that 4% sometime in a run rate with late 2024 or do you feel like you could achieve it sometime in early or late 2025 just given the current rate environment as you see it today?
Russell Hutchinson: Yes, I’d say — and I’ll address your question in a stable rate environment rather than speculate around the timing of rates. But I’d say in a stable rate environment, our expectation is still crystal clear to get to 4% NIM. I think we’re kind of looking at the portfolio of replacement impact. I think you could see us there entering 2025.
Kevin Barker: And then does that…
Russell Hutchinson: Caveat that with the view that I don’t want to be in the business and speculating in terms of where short-term rates go.
Kevin Barker: Got it. Makes sense. And then just a follow-up on your estimated origination yields. Do you feel like you can maintain that 10.7% auto origination yields through the next foreseeable future just given the competitive environment for auto lending, we’ve seen quite a few banks pull back from the sector in the last year, but seemed to be reengaging, do you feel like that 10.7% is an adequate number or at least a stable competitive environment?
Russell Hutchinson: Yes, I do, actually. The pullback in competition this time around I actually think has more durability to it than what we’ve seen in past cycles. For a number of folks, this isn’t a core business for them. And I think the regulatory capital pressures that other folks are on, it really has forced people to make hard decisions and to really focus on the businesses that they’re best at. We’ve certainly had to think through our capital allocation across various businesses at Ally. But as you know, the Auto Finance business is absolutely core for us. And so I think the pullback in competition when you look at players they haven’t just dialed back their originations. Many have exited the market altogether. And I think that creates a durability to this competitive environment that we’re currently seeing.
So yes, I do think we can maintain our rates. And I would just say, just when you kind of — when you unpack our yields, remember, we’ve increased pricing at the same time that we’ve been tightening credit. And so we’ve listed the credit — the credit profile of our originations at the same time that we’ve increased pricing. If you were to look at it on a same credit basis, our pricing has actually increased significantly more than what we show in terms of this 10.7% yield, and the 95% beta that we’ve printed. So yes, I think there we have a number of levers in place. And I do think that the competitive environment that we’re seeing now is durable and so will give us the ability to maintain that 10.7% yield for a while. I don’t want to speculate on rates coming down, but obviously, rates coming down create a tailwind for us just in terms of that portfolio replacement effect that’s currently causing a headwind.
Kevin Barker: Thank you Russ.
Sean Leary: Thank you all. That’s all the time we have for today. As always, if you have additional questions, please feel free to reach out to Investor Relations. Thank you for joining us this morning. That concludes today’s call.
