Is Ally Stock a Buy Now?

Core Insights - The banking sector had a strong performance in the previous year, with the Dow Jones U.S. Banks Index gaining 37%, outperforming the S&P 500's 25% gain, aided by the Federal Reserve's interest rate cut in September [1] Company Overview - Ally Financial is recognized as the largest all-digital bank in the U.S., having been spun off from General Motors in 2010, leveraging a first-mover advantage and extensive data [3] - The bank has a significant presence in the auto lending market, originating $9.5 billion in auto loans in the third quarter, with expectations of 14 million applications for the full year, up from 13.8 million last year [6] Customer Base and Growth - Ally added 57,000 net new deposit customers in the third quarter, bringing the total to 3.3 million, with a high retention rate of 95% [4] - A notable 74% of new members are from Millennial and Gen Z demographics, indicating strong engagement and long-term growth potential [5] Financial Performance - Despite recent pressures, Ally reported rising earnings per share and return on tangible common equity in the third quarter, although the market remains cautious about smaller banks [8] - The stock is currently trading at a low price-to-book ratio of about 0.9 and a forward one-year P/E ratio of 6, with a dividend yield of 3.4%, which is higher than most bank stocks [9] Market Position and Future Outlook - Ally has adopted more conservative lending practices in response to rising default rates, with a weighted average FICO credit score for auto loans at 710, and a decrease in approval rates from 30% to 28% [7] - The company has long-term advantages in its digital platform and robust auto loan business, suggesting potential value for investors [10]