Sanjay Sakhrani: Okay. Great. That’s very helpful. And I guess my follow-up question, I guess this is for you, JB, it might be a question for the Board, just where are we with timing of a final CEO? I think it’s obviously taken a little bit longer than we thought. Doug, obviously, you sound very qualified. So, I’m just trying to get a sense of sort of how we should think this plays out over the course of the next months or so.
Jeff Brown: Yeah. I mean, Sanjay, I think — I appreciate the question. And what I would say is the Board has been very hard at work. These things not always go in a perfectly straight line, but there’s been an extraordinary amount of effort in interviewing. And I think what I’ve appreciated about our Board and I’ve been involved in it, is not willing to sacrifice. I mean, we want to get a great operational leader, a great cultural leader, somebody that understands the nuances of banking. And so we’ve been very disciplined in that regard. I would expect, over the coming quarter, we will be in a position to announce somebody permanent. But again, it’s still a very fluid process. I think very fortunate to have Doug here, ready to go, had a really strong leadership team behind Doug.
Doug’s got the full support of them. He’s got the full support of the Board, the customer base, and he’s been around the block, so our employees know him, and he’s going to slide right in. So, I’m not worried at all about continuity in this interim period. But I think over the next few months, that should be your baseline expectation to when we’ll have a permanent candidate. But again, no sacrifices here. We’re going to make sure we get the right next leader to build on the foundation we have in place today and carry the company forward.
Operator: Thank you. One moment for our next question, please. And it comes from the line of Jeff Adelson with Morgan Stanley. Please proceed.
Jeff Adelson: Yes. Hi. Thanks for taking my questions. I guess I just wanted to circle back on the net interest margin commentary. As you kind of think about the potential benefit from the forward curve here, getting you to a 4% mark by mid-2025, just trying to understand what kind of assumptions you have in there for your deposit beta. And as we think through the first couple of quarters of 2024, do you think that you kind of reached as close to the peak as you can get on your deposit rate given that you kind of held that OSA rate steady? And, let’s say, the forward curve continues to price in more rate cuts, would you be looking to maybe add a little bit more in the way of hedges as you see opportunities and maybe that would defer the eventual benefit to getting to 4% if you do that?
Russ Hutchinson: Great. Thanks, Jeff. Thanks for your question. Look, I think as we think and maybe I’ll start on deposit pricing and kind of maybe you’ve seen we put in another set of rate reductions on the CD side this morning, our second so far in 2024. And so, we’re definitely seeing some benefits already from the interest rate environment. All that being said, as we think about our deposit pricing and rates, we look at — our expectation is that we don’t see our deposit pricing adjusting immediately, but it does adjust. And to the extent that there are further rate cuts in 2024, we’ll see that in our deposit pricing, but we’ll see it in a delayed way. In terms of our deposit beta, we’ve been running around 70%. That’s still our expectation going forward in terms of deposit beta. And so, I think, I hopefully, I answered most of your questions there, but let me know if I’ve missed some.
Jeff Adelson: Just on the hedging, the opportunity to do more there?
Russ Hutchinson: Yeah, look, I think our sense is the Fed is done on tightening. We obviously are somewhat opportunistic in the market in terms of just kind of looking at what the outlook is. We took advantage of an opportunity in the fourth quarter where there was a real rate rally to take some of the variability off the table for us over the course of ’24. It’s hard for me to project kind of how the markets will behave kind of going forward. But look, certainly, if there are opportunities that make sense for us, we’ll pursue those, but again, I’m not going to speculate on rates.
Operator: Thank you. And one moment for our next question, please. And it comes from the line of Rick Shane with JPMorgan. Please proceed.
Rick Shane: Good morning, everybody, and thanks for taking my question. Jeff, I’m really glad I got on the line. It’s been a pleasure covering your company, and I’ve really admired what I see as your commitment to the culture and ethos of Ally, and it really is a great legacy. So, congratulations and thank you so much.
Rick Shane: Thank you, Rick. That means a lot to me. And one of the CEOs I greatly admire is at the top of your firm that always prioritizes people and does things the right way. So, it’s been an absolute honor leading Ally and appreciate your consistent support as well, Rick. So, thank you.
Rick Shane: Thank you. I wanted to talk a little bit about two trends in terms of auto. What we keep hearing is tightening of credit and raising of rates. The borrower quality is going up, but essentially affordability is going down. Russ, you showed us Slide 17 where you basically start to balance that out in terms of the impact on credit. But I am curious when you think about loss frequency given the decline in affordability, is this really ultimately going to be a net positive? One thing I would mention is that when I look at that slide, it doesn’t contemplate the impact of the huge decline in gas prices during the sort of comparable windows. The ’22 vintage sort of peaked or was seasoning as gas prices were going up sharply. The ’23 is seasoning as gas prices are going down. So, I think when you sort of neutralize for that, I’m curious if you actually think frequency will improve.
Russ Hutchinson: Yeah. No, it’s a fair question. As you can imagine, we pay a lot of attention to credit. We’re constantly looking at vintages on a monthly basis and even sub-segmenting within that to understand the performance of our book. I would characterize, obviously, the losses on the 2022 book is being elevated. It’s interesting that that elevation and loss content is coming at a time when employment is so strong and so we characterize that as something that is very much driven by inflation and a number of our borrowers struggling with this inflationary environment. So that impact is not lost on us. That being said, as you can imagine, we monitor our credit quite closely. We also pay a lot of attention to servicing and we’ve made a number of adjustments to how we service, in particular, timing of repossession.
We have found we get better outcomes delaying repossession. It feels giving our collectors additional time to work their credits and giving our borrowers a little additional time tends to work out in our favor and we’re getting better outcomes by doing that. And so, we can see that in terms of the way that we look at our delinquency rolls as well as our flow to loss. Our flow to loss rates have continued to be favorable going through this cycle. You can imagine, we’re looking at our vintages at a much more granular level than what’s available publicly. And so, when we look at Page 17, that chart in the bottom middle, and you can see that 2023 vintage is starting to bend away from the 2022 vintages in a favorable way. What gives us confidence there in that trend continuing and expanding is our more granular look as we look month to month.
