Q4 2025 Ally Financial Inc Earnings Call

January 21, 2026

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your touch-tone telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded.

Speaker #1: I will now turn the conference over to your speaker host for today, Sean Leary, Q2 Financial Planning and Investor Relations Officer, please go ahead.

Speaker #2: Thank you, Lydia. Good morning and welcome to Ally Financial's Fourth Quarter 2025 earnings call. This morning, our CEO, Michael Rhodes, and our CFO, Russ Hutchinson, will review Ally's results before taking questions.

Sean Leary: Thank you, Lydia. Good morning, and welcome to Ally Financial's Q4 2025 earnings call. This morning, our CEO, Michael Rhodes, and our CFO, Russ Hutchinson, will review Ally's results before taking questions. The presentation we'll reference can be found on the Investor Relations section of our website, ally.com. Forward-looking statements and risk factor language governing today's call are on page two. GAAP and non-GAAP measures pertaining to our operating performance and capital results are on pages three and four. As a reminder, non-GAAP or core metrics are supplemental to and not a substitute for US GAAP measures. Definitions and reconciliations can be found in the appendix. And with that, I'll turn the call over to Michael. Thank you, Sean, and good morning, everyone. I appreciate you joining us today for our Q4 earnings call. Before we cover our results, I'd like to take a moment to reflect on the year.

Speaker #2: The presentation we will reference can be found in the Investor Relations section of our website, ally.com. Forward-looking statements and risk factor language governing today's call are on page two.

Speaker #2: Gap and non-gap measures pertaining to our operating performance and capital results are on pages three and four. As a reminder, non-gap or core metrics are supplemental to and not a substitute for U.S.

Q4 2025 Ally Financial Inc Earnings Call

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Ally Financial

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Q4 2025 Ally Financial Inc Earnings Call

ALLY

Wednesday, January 21st, 2026 at 2:00 PM

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Sean Leary: After my first full year as Chief Executive, I am grateful and optimistic. Grateful for what has been built before I joined and optimistic for what's ahead. My optimism is shaped by the strategic refresh we undertook in 2025. Deliberate choices backed by disciplined execution have delivered solid results. At the heart of our refresh was the focused strategy we rolled out to start the year. Focus means we are investing in businesses and segments where we have clear competitive advantages and a reason to win. That is, areas where we are unique and special. Our results validate that we are on the right path. 2025 marked a shift where results demonstrated tangible progress, including delivering on the detailed guidance we provided in January. With that, let me recap full year performance on page five. Adjusted EPS of $3.81 was up 62% year-over-year.

After my first full year as Chief Executive, I am grateful and optimistic. Grateful for what has been built before I joined and optimistic for what's ahead. My optimism is shaped by the strategic refresh we undertook in 2025. Deliberate choices backed by disciplined execution have delivered solid results. At the heart of our refresh was the focused strategy we rolled out to start the year. Focus means we are investing in businesses and segments where we have clear competitive advantages and a reason to win. That is, areas where we are unique and special. Our results validate that we are on the right path. 2025 marked a shift where results demonstrated tangible progress, including delivering on the detailed guidance we provided in January. With that, let me recap full year performance on page five. Adjusted EPS of $3.81 was up 62% year-over-year.

Sean Leary: Core ROTCE of 10.4% was up more than 300 basis points versus 2024. Encouraging progress with room to expand further. The three drivers for sustainable mid-teens returns have been consistent, and the progress we are making is clear. We have executed against two of the three drivers and remain positioned to deliver on the final as we progress forward. Retail net charge-offs ended the year below 2%. Importantly, we see further opportunity as we continue to benefit from vintage rollover and our dynamic approach to underwriting and servicing. Clearly, the macro will play a role in how losses materialize in any given year, but we remain confident in the direction of travel over time. Expense and capital discipline remain a top priority. We have been and will continue to be prudent stewards of shareholder capital and make investments to position Ally for durable long-term performance.

Core ROTCE of 10.4% was up more than 300 basis points versus 2024. Encouraging progress with room to expand further. The three drivers for sustainable mid-teens returns have been consistent, and the progress we are making is clear. We have executed against two of the three drivers and remain positioned to deliver on the final as we progress forward. Retail net charge-offs ended the year below 2%. Importantly, we see further opportunity as we continue to benefit from vintage rollover and our dynamic approach to underwriting and servicing. Clearly, the macro will play a role in how losses materialize in any given year, but we remain confident in the direction of travel over time. Expense and capital discipline remain a top priority. We have been and will continue to be prudent stewards of shareholder capital and make investments to position Ally for durable long-term performance.

Sean Leary: These financial results reflect the impact of a handful of deliberate choices, including exiting non-core businesses, repositioning a portion of our investment securities portfolio as we continue migrating towards a more neutral rate position, maintaining expense discipline to create capacity for appropriate investments, while reducing controllable expenses by 1% versus 2024, and executing two credit risk transfer transactions for a total of $10 billion in notional retail auto loans, sourcing highly efficient capital. Together, our actions have resulted in lower credit risk, lower interest rate risk, higher capital levels, a more efficient expense base, and, in aggregate, a stronger foundation. We grew in the core businesses that we want to grow with a sharp focus on risk and returns. Retail auto and corporate finance loans were up 5% in 2025 on the back of strong momentum in these core franchises.

These financial results reflect the impact of a handful of deliberate choices, including exiting non-core businesses, repositioning a portion of our investment securities portfolio as we continue migrating towards a more neutral rate position, maintaining expense discipline to create capacity for appropriate investments, while reducing controllable expenses by 1% versus 2024, and executing two credit risk transfer transactions for a total of $10 billion in notional retail auto loans, sourcing highly efficient capital. Together, our actions have resulted in lower credit risk, lower interest rate risk, higher capital levels, a more efficient expense base, and, in aggregate, a stronger foundation. We grew in the core businesses that we want to grow with a sharp focus on risk and returns. Retail auto and corporate finance loans were up 5% in 2025 on the back of strong momentum in these core franchises.

Sean Leary: As a result of this progress, we announced a $2 billion open-ended share repurchase authorization in December. The resumption of repurchases is not a declaration of victory, but a clear indication of the progress we've made and our confidence in the path ahead. As we've said before, we will start low and slow with share repurchases. The opportunities for growth across our core franchises are encouraging and accretive. Organic growth remains our priority when allocating capital. However, adding share repurchases provides another option for capital deployment as we maintain an unwavering focus on risk-adjusted returns. With that, let's turn to page six and discuss those core franchises. Execution within each of our core franchises has been strong, and the momentum positions us for sustainably higher returns.

As a result of this progress, we announced a $2 billion open-ended share repurchase authorization in December. The resumption of repurchases is not a declaration of victory, but a clear indication of the progress we've made and our confidence in the path ahead. As we've said before, we will start low and slow with share repurchases. The opportunities for growth across our core franchises are encouraging and accretive. Organic growth remains our priority when allocating capital. However, adding share repurchases provides another option for capital deployment as we maintain an unwavering focus on risk-adjusted returns. With that, let's turn to page six and discuss those core franchises. Execution within each of our core franchises has been strong, and the momentum positions us for sustainably higher returns.

Sean Leary: Dealer Financial Services delivered an exceptional year of performance, reflecting the benefits of our scale, the breadth of our products and services, and the depth of our relationships with our dealer customers. 15.5 million applications were an all-in record and allow us to be selective in what we originate. Given the strength at the top of the funnel, we originated $43.7 billion in consumer loans. That's up 11% year-over-year with a 9.7% origination yield, while 43% of the volume was concentrated within our highest tier of credit quality. We continue to see opportunities for responsible growth at attractive risk-adjusted spreads based on the uniquely strong partnership we have with our dealer network. Beyond headline origination figures, I'm encouraged by the continued growth across SmartAuction and our pass-through programs, which are expected to contribute durable fee growth moving forward.

Dealer Financial Services delivered an exceptional year of performance, reflecting the benefits of our scale, the breadth of our products and services, and the depth of our relationships with our dealer customers. 15.5 million applications were an all-in record and allow us to be selective in what we originate. Given the strength at the top of the funnel, we originated $43.7 billion in consumer loans. That's up 11% year-over-year with a 9.7% origination yield, while 43% of the volume was concentrated within our highest tier of credit quality. We continue to see opportunities for responsible growth at attractive risk-adjusted spreads based on the uniquely strong partnership we have with our dealer network. Beyond headline origination figures, I'm encouraged by the continued growth across SmartAuction and our pass-through programs, which are expected to contribute durable fee growth moving forward.

Sean Leary: Moving to insurance, written premiums exceeded $1.5 billion, a record for Ally. Synergies between auto finance and insurance continue to strengthen our all-in value proposition and enable us to support our dealer partners across all aspects of their business. In corporate finance, we deliver a 28% ROE with strong year-over-year growth in the loan portfolio. Managing credit risk remains a top priority, and a second consecutive year with no charge-offs reflects the strength of our underwriting. We have the benefit of being the lead agent in virtually all of our transactions, giving us the ability to own the diligence process and structure transactions appropriately. Turning to digital bank, our customer-first approach continues to set us apart. We ended the year with $144 billion in retail deposit balances, reinforcing our position as the largest all-digital direct bank in the US.

Moving to insurance, written premiums exceeded $1.5 billion, a record for Ally. Synergies between auto finance and insurance continue to strengthen our all-in value proposition and enable us to support our dealer partners across all aspects of their business. In corporate finance, we deliver a 28% ROE with strong year-over-year growth in the loan portfolio. Managing credit risk remains a top priority, and a second consecutive year with no charge-offs reflects the strength of our underwriting. We have the benefit of being the lead agent in virtually all of our transactions, giving us the ability to own the diligence process and structure transactions appropriately. Turning to digital bank, our customer-first approach continues to set us apart. We ended the year with $144 billion in retail deposit balances, reinforcing our position as the largest all-digital direct bank in the US.

Sean Leary: We saw solid growth in Q4, and on a full-year basis, balances were roughly flat. That's in line with our expectations to start the year. Our focus remains on providing best-in-class products and services to drive customer growth and retention. We now serve 3.5 million customers as 2025 marked our 17th consecutive year of customer growth. Over time, this will continue driving a less rate-sensitive portfolio with lower average account balances. The strength and stability of what we've built is a valuable component of our enterprise. Retail deposits continue to represent nearly 90% of total funding, and 92% are FDIC insured. Before passing to Russ, I want to share a few high-level thoughts. Our core franchises are well-positioned, and their success is fueled by our strong do-it-right culture and leading brand.

We saw solid growth in Q4, and on a full-year basis, balances were roughly flat. That's in line with our expectations to start the year. Our focus remains on providing best-in-class products and services to drive customer growth and retention. We now serve 3.5 million customers as 2025 marked our 17th consecutive year of customer growth. Over time, this will continue driving a less rate-sensitive portfolio with lower average account balances. The strength and stability of what we've built is a valuable component of our enterprise. Retail deposits continue to represent nearly 90% of total funding, and 92% are FDIC insured. Before passing to Russ, I want to share a few high-level thoughts. Our core franchises are well-positioned, and their success is fueled by our strong do-it-right culture and leading brand.

Sean Leary: I am energized by how our 10,000 teammates deliver for our customers every day and how they've rallied around the focus strategy. Our engagement scores remained in the top 10% of companies globally for the sixth consecutive year, and we were eight points higher than the industry average, demonstrating Ally's purpose-driven culture remains a key differentiator. Our brand continues to resonate in the market and serves as a key reason customers come to Ally and want to do more business with us. Overall, 2025 marked a meaningful step forward for Ally. I'm encouraged by the progress we've made, but more importantly, I'm excited for what remains ahead. With that, I'll turn it over to Russ to walk through the financials in more detail. Thank you, Michael. I'll begin by walking through Q4 performance on slide seven.

Sean Leary: In the fourth quarter, net financing revenue, excluding OID, of $1.6 billion was up 6% from the prior year. We continue to benefit from the momentum in our core franchises, disciplined deposit pricing, and ongoing optimization of the balance sheet toward higher-yielding asset classes. Adjusted other revenue of $550 million in the fourth quarter was down 2% year-over-year and excludes a $27 million loss as we moved nearly $400 million of legacy mortgage assets to held for sale. This move reflects ongoing optimization of our balance sheet and is consistent with our focus strategy. We are taking advantage of a strong bid for mortgage credit to sell portions of our portfolio which carry more complexity and higher servicing costs. Following the expected sale of these mortgage loans, our portfolio will be entirely first-lien fixed-rate mortgages, which will continue to run off over time.

In the fourth quarter, net financing revenue, excluding OID, of $1.6 billion was up 6% from the prior year. We continue to benefit from the momentum in our core franchises, disciplined deposit pricing, and ongoing optimization of the balance sheet toward higher-yielding asset classes. Adjusted other revenue of $550 million in the fourth quarter was down 2% year-over-year and excludes a $27 million loss as we moved nearly $400 million of legacy mortgage assets to held for sale. This move reflects ongoing optimization of our balance sheet and is consistent with our focus strategy. We are taking advantage of a strong bid for mortgage credit to sell portions of our portfolio which carry more complexity and higher servicing costs. Following the expected sale of these mortgage loans, our portfolio will be entirely first-lien fixed-rate mortgages, which will continue to run off over time.

Sean Leary: Full-year adjusted other revenue was up approximately 2%, despite the headwind from the sale of credit card and the exit from mortgage originations. Excluding that headwind, other revenue was up 5%, reflecting the momentum across our core franchises. Diversified other revenue streams, including insurance, SmartAuction, and our auto pass-through programs, are capital-efficient and less sensitive to consumer credit cycles, positioning them to remain tailwinds into 2026 and beyond. Fourth-quarter adjusted provision expense of $486 million was down $71 million year-over-year, largely driven by continued improvement in retail auto NCOs as well as the exit from the credit card business. The year-over-year net charge-off comparison includes $56 million of credit card activity in Q4 2024. The fourth-quarter retail auto NCO rate declined 20 basis points year-over-year to 2.14%. Adjusted non-interest expense of $1.2 billion excludes a $31 million restructuring charge associated with a reduction in force.

Full-year adjusted other revenue was up approximately 2%, despite the headwind from the sale of credit card and the exit from mortgage originations. Excluding that headwind, other revenue was up 5%, reflecting the momentum across our core franchises. Diversified other revenue streams, including insurance, SmartAuction, and our auto pass-through programs, are capital-efficient and less sensitive to consumer credit cycles, positioning them to remain tailwinds into 2026 and beyond. Fourth-quarter adjusted provision expense of $486 million was down $71 million year-over-year, largely driven by continued improvement in retail auto NCOs as well as the exit from the credit card business. The year-over-year net charge-off comparison includes $56 million of credit card activity in Q4 2024. The fourth-quarter retail auto NCO rate declined 20 basis points year-over-year to 2.14%. Adjusted non-interest expense of $1.2 billion excludes a $31 million restructuring charge associated with a reduction in force.

Sean Leary: These decisions are never easy, but reflect our unwavering focus on balancing investments with expense discipline. Our strategic pivot has created a more focused, efficient organization, and these actions create capacity to continue investing in our core businesses in areas like cyber and AI. Full-year adjusted non-interest expense was approximately flat year-over-year, while controllable expenses were down 1%, demonstrating our commitment to cost discipline that will continue going forward. GAAP and adjusted EPS for the quarter were $0.95 and $1.09, respectively. Moving to slide eight, net interest margin, excluding OID, of 3.51% decreased four basis points from the prior quarter, resulting in full-year NIM of 3.47%. That is in the top half of the net interest margin guide we provided at the beginning of the year.

These decisions are never easy, but reflect our unwavering focus on balancing investments with expense discipline. Our strategic pivot has created a more focused, efficient organization, and these actions create capacity to continue investing in our core businesses in areas like cyber and AI. Full-year adjusted non-interest expense was approximately flat year-over-year, while controllable expenses were down 1%, demonstrating our commitment to cost discipline that will continue going forward. GAAP and adjusted EPS for the quarter were $0.95 and $1.09, respectively. Moving to slide eight, net interest margin, excluding OID, of 3.51% decreased four basis points from the prior quarter, resulting in full-year NIM of 3.47%. That is in the top half of the net interest margin guide we provided at the beginning of the year.

Sean Leary: Continued expansion of the retail auto portfolio yield and decreasing deposit costs were offset by the repricing of floating-rate exposures and lower lease yields during the quarter. Retail auto portfolio yield, excluding the impact from hedges, increased six basis points sequentially as we continue to originate above the portfolio yield. Resilient yields, while maintaining consistent risk appetite, reflect the benefit of record application flow, enabling selectivity in what we ultimately originate. Given the forward curve, we expect the portfolio yield has peaked and will remain relatively flat throughout 2026, as lower benchmarks are reflected in originated yields. While used values were stable in aggregate, we recognize losses of $11 million on lease terminations concentrated in a subset of weaker-performing models. Residual values on plug-in electric hybrids have been pressured following the elimination of the EV tax credit, an OEM recall, and increased OEM incentives on new models.

Continued expansion of the retail auto portfolio yield and decreasing deposit costs were offset by the repricing of floating-rate exposures and lower lease yields during the quarter. Retail auto portfolio yield, excluding the impact from hedges, increased six basis points sequentially as we continue to originate above the portfolio yield. Resilient yields, while maintaining consistent risk appetite, reflect the benefit of record application flow, enabling selectivity in what we ultimately originate. Given the forward curve, we expect the portfolio yield has peaked and will remain relatively flat throughout 2026, as lower benchmarks are reflected in originated yields. While used values were stable in aggregate, we recognize losses of $11 million on lease terminations concentrated in a subset of weaker-performing models. Residual values on plug-in electric hybrids have been pressured following the elimination of the EV tax credit, an OEM recall, and increased OEM incentives on new models.

Sean Leary: Pressure on these models increased later in the quarter, and we'll continue to monitor trends as we move throughout Q1 and into the used vehicle selling season. Our lease portfolio mix is shifting. About half of the leases we originated over the past two years have OEM residual value guarantees, and the leases we have originated without the benefit of residual value guarantees reflect a more diversified mix of OEMs. While we may see pressure moving forward, the ongoing remixing of the portfolio should reduce gain and loss volatility over time. Cost of funds decreased 11 basis points quarter over quarter, driven by a 12 basis points decrease in deposit costs. Last quarter, we spoke about deposit pricing beta starting low as we began another easing cycle. Over time, we expect deposit pricing beta will increase, driving NIM expansion.

Pressure on these models increased later in the quarter, and we'll continue to monitor trends as we move throughout Q1 and into the used vehicle selling season. Our lease portfolio mix is shifting. About half of the leases we originated over the past two years have OEM residual value guarantees, and the leases we have originated without the benefit of residual value guarantees reflect a more diversified mix of OEMs. While we may see pressure moving forward, the ongoing remixing of the portfolio should reduce gain and loss volatility over time. Cost of funds decreased 11 basis points quarter over quarter, driven by a 12 basis points decrease in deposit costs. Last quarter, we spoke about deposit pricing beta starting low as we began another easing cycle. Over time, we expect deposit pricing beta will increase, driving NIM expansion.

Sean Leary: We believe a through-the-cycle beta in the 60s, which we continue to expect, is sufficient to reach our high-threes NIM target. Importantly, we have strong momentum on both sides of the balance sheet from our multi-year transformation and remain confident in our path to an upper-threes margin over time. Average earning assets on a full-year basis ended down 2%, consistent with the outlook we shared during second-quarter earnings. Importantly, ending asset balances were up 2%, reflecting the growth we've seen in the places where we want to grow and demonstrating our momentum as we head into 2026. In aggregate, ending balances across retail auto and corporate finance were up $5 billion, or more than 5% year-over-year. On a fully phased-in basis for AOCI, CET1 for the period was 8.3%, an increase of approximately 120 basis points during the year.

We believe a through-the-cycle beta in the 60s, which we continue to expect, is sufficient to reach our high-threes NIM target. Importantly, we have strong momentum on both sides of the balance sheet from our multi-year transformation and remain confident in our path to an upper-threes margin over time. Average earning assets on a full-year basis ended down 2%, consistent with the outlook we shared during second-quarter earnings. Importantly, ending asset balances were up 2%, reflecting the growth we've seen in the places where we want to grow and demonstrating our momentum as we head into 2026. In aggregate, ending balances across retail auto and corporate finance were up $5 billion, or more than 5% year-over-year. On a fully phased-in basis for AOCI, CET1 for the period was 8.3%, an increase of approximately 120 basis points during the year.

Sean Leary: During the quarter, we executed our second credit risk transfer of the year, issuing a $550 million note on $5 billion of high-quality retail auto loans, which generated approximately 20 basis points of CET1 at issuance. Following our announced share repurchase authorization in December, we repurchased $24 million in common stock, reflecting the low-and-slow approach we've outlined. Moving forward, we'll be dynamic with our level of buybacks in any given quarter. We're encouraged by our ability to execute a story of "and, not or." We are prioritizing organic growth across our core portfolios while maintaining our competitive dividend, continuing to build our fully phased-in capital levels, and returning capital to shareholders through share repurchases. At the bottom of the page, we ended the year with adjusted tangible book value per share of $40, up nearly 20% in the past year.

During the quarter, we executed our second credit risk transfer of the year, issuing a $550 million note on $5 billion of high-quality retail auto loans, which generated approximately 20 basis points of CET1 at issuance. Following our announced share repurchase authorization in December, we repurchased $24 million in common stock, reflecting the low-and-slow approach we've outlined. Moving forward, we'll be dynamic with our level of buybacks in any given quarter. We're encouraged by our ability to execute a story of "and, not or." We are prioritizing organic growth across our core portfolios while maintaining our competitive dividend, continuing to build our fully phased-in capital levels, and returning capital to shareholders through share repurchases. At the bottom of the page, we ended the year with adjusted tangible book value per share of $40, up nearly 20% in the past year.

Sean Leary: Earnings expansion and AOCI accretion will support further book value growth over time. Additionally, we updated our calculation of core return on tangible common equity. This new methodology does not alter our earnings outlook in any way. It improves transparency and creates alignment between returns, book value, and ultimately earnings per share. We have added incremental disclosure, clearly outlining the changes in the supplemental slides of this presentation. In short, we have eliminated the deferred tax asset adjustment from our prior methodology to streamline calculation as well as increase transparency and comparability. As we approach our 9% management target for fully phased-in CET1, we believe this new core ROTCE metric is appropriately aligned to our mid-teens target for sustainable return. Let's turn to slide 10 to review asset quality trends. Consolidated net charge-offs of 134 basis points were up 16 basis points quarter over quarter, driven by seasonality.

Earnings expansion and AOCI accretion will support further book value growth over time. Additionally, we updated our calculation of core return on tangible common equity. This new methodology does not alter our earnings outlook in any way. It improves transparency and creates alignment between returns, book value, and ultimately earnings per share. We have added incremental disclosure, clearly outlining the changes in the supplemental slides of this presentation. In short, we have eliminated the deferred tax asset adjustment from our prior methodology to streamline calculation as well as increase transparency and comparability. As we approach our 9% management target for fully phased-in CET1, we believe this new core ROTCE metric is appropriately aligned to our mid-teens target for sustainable return. Let's turn to slide 10 to review asset quality trends. Consolidated net charge-offs of 134 basis points were up 16 basis points quarter over quarter, driven by seasonality.

Sean Leary: We continue to see strong credit performance in our commercial portfolios, resulting in zero net charge-offs for the second consecutive year. Full-year consolidated NCOs finished below the range provided a year ago, driven by continued improvement in retail auto credit and the aforementioned strength across our commercial portfolios. Retail auto net charge-offs of 214 basis points were up 26 basis points quarter over quarter, reflecting seasonal trends, but down 20 basis points compared to a year ago. Year-over-year improvement across all quarters of 2025 reflects the tailwind from vintage rollover dynamics and the benefit of enhanced servicing strategies. Our full-year retail auto net charge-off rate was 1.97%, below the bottom end of our guide and notably below the 2% mark we referenced as a key pillar to achieve our mid-teens return target.

We continue to see strong credit performance in our commercial portfolios, resulting in zero net charge-offs for the second consecutive year. Full-year consolidated NCOs finished below the range provided a year ago, driven by continued improvement in retail auto credit and the aforementioned strength across our commercial portfolios. Retail auto net charge-offs of 214 basis points were up 26 basis points quarter over quarter, reflecting seasonal trends, but down 20 basis points compared to a year ago. Year-over-year improvement across all quarters of 2025 reflects the tailwind from vintage rollover dynamics and the benefit of enhanced servicing strategies. Our full-year retail auto net charge-off rate was 1.97%, below the bottom end of our guide and notably below the 2% mark we referenced as a key pillar to achieve our mid-teens return target.

Sean Leary: Moving to the top of the page, 30-plus all-in delinquencies of 5.25% were down 21 basis points from the prior year, marking the third consecutive quarter of year-over-year improvement on an all-in basis. This continued improvement further reinforces our constructive view on the near-term loss trajectory within our portfolio, but we remain mindful of the macroeconomic environment, particularly the labor market and used vehicle values. Turning to the bottom of the page on reserves, consolidated coverage decreased three basis points this quarter to 2.54%, while the retail auto coverage rate remained flat at 3.75%. Our retail auto coverage levels continue to balance favorable credit trends within our portfolio against macroeconomic uncertainty. Moving to slide 11 to review auto segment highlights. Pre-tax income of $372 million was lower year-over-year, primarily driven by lower commercial balances, lease mix dynamics, and reserve build, and higher servicing-related expenses given growth in the retail portfolio.

Moving to the top of the page, 30-plus all-in delinquencies of 5.25% were down 21 basis points from the prior year, marking the third consecutive quarter of year-over-year improvement on an all-in basis. This continued improvement further reinforces our constructive view on the near-term loss trajectory within our portfolio, but we remain mindful of the macroeconomic environment, particularly the labor market and used vehicle values. Turning to the bottom of the page on reserves, consolidated coverage decreased three basis points this quarter to 2.54%, while the retail auto coverage rate remained flat at 3.75%. Our retail auto coverage levels continue to balance favorable credit trends within our portfolio against macroeconomic uncertainty. Moving to slide 11 to review auto segment highlights. Pre-tax income of $372 million was lower year-over-year, primarily driven by lower commercial balances, lease mix dynamics, and reserve build, and higher servicing-related expenses given growth in the retail portfolio.

Sean Leary: On the bottom left, we've highlighted the trajectory of retail auto portfolio yields. Excluding the impact from hedges, yields were up 6 basis points quarter over quarter and 18 basis points year-over-year. Our scale and record application volume led to another strong quarterly vintage with attractive risk-adjusted spreads. Fourth-quarter originated yield of 9.6% was down quarter over quarter, but demonstrated resilience given the move in underlying benchmarks. Our ability to actively calibrate our buybacks with the evolving markets supports risk-adjusted returns through the cycle. On the bottom right of the page, $10.8 billion of consumer originations were up 6% versus the prior year period and were enabled by the 10% increase in application volume that we saw. Our established dealer relationships and full-spectrum approach enabled this accretive growth despite headwinds.

On the bottom left, we've highlighted the trajectory of retail auto portfolio yields. Excluding the impact from hedges, yields were up 6 basis points quarter over quarter and 18 basis points year-over-year. Our scale and record application volume led to another strong quarterly vintage with attractive risk-adjusted spreads. Fourth-quarter originated yield of 9.6% was down quarter over quarter, but demonstrated resilience given the move in underlying benchmarks. Our ability to actively calibrate our buybacks with the evolving markets supports risk-adjusted returns through the cycle. On the bottom right of the page, $10.8 billion of consumer originations were up 6% versus the prior year period and were enabled by the 10% increase in application volume that we saw. Our established dealer relationships and full-spectrum approach enabled this accretive growth despite headwinds.

Sean Leary: Last year, we faced elevated competition, significant pull-forward demand in Q2 and Q3 tied to tariffs and EV tax credit expiration, and fourth-quarter new light vehicle sales that were down more than 5% year-over-year. Record application volume throughout the year has supported our ability to remain selective, driving accretive growth while also providing opportunity to monetize declined applications through our pass-through program. Turning to insurance on slide 12, core pre-tax income was $89 million, roughly flat year-over-year. Total written premiums of $384 million were also relatively flat versus 2024, while insurance losses of $111 million were down $5 million year-over-year. Insurance provides a durable, capital-efficient revenue source and remains a key driver of our long-term growth strategy.

Last year, we faced elevated competition, significant pull-forward demand in Q2 and Q3 tied to tariffs and EV tax credit expiration, and fourth-quarter new light vehicle sales that were down more than 5% year-over-year. Record application volume throughout the year has supported our ability to remain selective, driving accretive growth while also providing opportunity to monetize declined applications through our pass-through program. Turning to insurance on slide 12, core pre-tax income was $89 million, roughly flat year-over-year. Total written premiums of $384 million were also relatively flat versus 2024, while insurance losses of $111 million were down $5 million year-over-year. Insurance provides a durable, capital-efficient revenue source and remains a key driver of our long-term growth strategy.

Sean Leary: Taking a step back, the portfolio has grown at an 8% CAGR since 2022, reflecting the disciplined approach that continues to guide our growth philosophy and is reflected in the credit characteristics of the portfolio. 2025 marked a second consecutive year with no new non-performing loans, while criticized assets and non-accrual loan exposures were 10% and 1% of the portfolio, remaining near historically low levels. Leveraging long-standing relationships with key partners in the industry remains critical to maintaining our culture of strong risk management. I will discuss our financial outlook on slide 14. We expect full-year NIM between 3.6% and 3.7%. The range for NIM reflects the evolving path of interest rates as the Fed easing cycle continues, with two cuts assumed for 2026. As we have consistently messaged, we are liability-sensitive over the medium term and asset-sensitive in the very near term.

Taking a step back, the portfolio has grown at an 8% CAGR since 2022, reflecting the disciplined approach that continues to guide our growth philosophy and is reflected in the credit characteristics of the portfolio. 2025 marked a second consecutive year with no new non-performing loans, while criticized assets and non-accrual loan exposures were 10% and 1% of the portfolio, remaining near historically low levels. Leveraging long-standing relationships with key partners in the industry remains critical to maintaining our culture of strong risk management. I will discuss our financial outlook on slide 14. We expect full-year NIM between 3.6% and 3.7%. The range for NIM reflects the evolving path of interest rates as the Fed easing cycle continues, with two cuts assumed for 2026. As we have consistently messaged, we are liability-sensitive over the medium term and asset-sensitive in the very near term.

Sean Leary: We'd expect early beta to drive a relatively flat margin through Q1, but given current trends on lease residuals, we expect NIM to be slightly down on a sequential basis. Looking beyond Q1, we remain confident in NIM migrating to the upper threes over time, supported by continued optimization on both sides of the balance sheet. Deposit repricing and continued remixing of the balance sheet towards higher-yielding assets will support margin expansion. In aggregate, retail auto and corporate finance are expected to grow in the mid-single digits, while mortgage loans and lower-yielding investment securities will continue to run off. In total, margin expansion will accelerate as deposit pricing beta increases toward our through-the-cycle target, consistent with what we observed in 2025 following Fed easing in 2024.

We'd expect early beta to drive a relatively flat margin through Q1, but given current trends on lease residuals, we expect NIM to be slightly down on a sequential basis. Looking beyond Q1, we remain confident in NIM migrating to the upper threes over time, supported by continued optimization on both sides of the balance sheet. Deposit repricing and continued remixing of the balance sheet towards higher-yielding assets will support margin expansion. In aggregate, retail auto and corporate finance are expected to grow in the mid-single digits, while mortgage loans and lower-yielding investment securities will continue to run off. In total, margin expansion will accelerate as deposit pricing beta increases toward our through-the-cycle target, consistent with what we observed in 2025 following Fed easing in 2024.

Sean Leary: Given the Q4 NIM of 3.51% and expectation for NIM to be down a bit in Q1, the full-year guide implies we expect to be approaching our upper threes NIM target exiting 2026. As a reminder, our NIM progression will be choppy on a quarter-to-quarter basis, but we remain confident in the destination. Moving to other revenue, we expect continued momentum across insurance, SmartAuction, and auto pass-through programs to drive low single-digit % growth year-over-year, which includes a roughly $25 million headwind from the loss of card fees earlier this year. On credit, we see retail auto net charge-offs between 1.8% and 2% for the year. 2025 performance showed tangible results from the dynamic underwriting and enhanced servicing capabilities we have implemented over the past two years. Our outlook reflects a balance between continued improvement from the remaining vintage rollover with ongoing macro uncertainty.

Given the Q4 NIM of 3.51% and expectation for NIM to be down a bit in Q1, the full-year guide implies we expect to be approaching our upper threes NIM target exiting 2026. As a reminder, our NIM progression will be choppy on a quarter-to-quarter basis, but we remain confident in the destination. Moving to other revenue, we expect continued momentum across insurance, SmartAuction, and auto pass-through programs to drive low single-digit % growth year-over-year, which includes a roughly $25 million headwind from the loss of card fees earlier this year. On credit, we see retail auto net charge-offs between 1.8% and 2% for the year. 2025 performance showed tangible results from the dynamic underwriting and enhanced servicing capabilities we have implemented over the past two years. Our outlook reflects a balance between continued improvement from the remaining vintage rollover with ongoing macro uncertainty.

Sean Leary: Last year, we highlighted the continuation of existing trends across delinquency, float-to-loss rates, and used values, provided a potential path to the low end of our guidance range. Those dynamics largely played out, and we achieved a full-year NCO rate just below the low end of our guide. This year, a continuation of these same trends would support performance around the midpoint of our guide, and achieving the lower end of the range would require incremental favorability within these drivers. Looking beyond retail auto, we expect consolidated net charge-offs between 1.2% and 1.4%. As we have noted, we are pleased with the performance of our commercial portfolios. However, these are not zero-loss businesses, nor do we price for that, and our full-year guide assumes a return to more normalized losses.

Last year, we highlighted the continuation of existing trends across delinquency, float-to-loss rates, and used values, provided a potential path to the low end of our guidance range. Those dynamics largely played out, and we achieved a full-year NCO rate just below the low end of our guide. This year, a continuation of these same trends would support performance around the midpoint of our guide, and achieving the lower end of the range would require incremental favorability within these drivers. Looking beyond retail auto, we expect consolidated net charge-offs between 1.2% and 1.4%. As we have noted, we are pleased with the performance of our commercial portfolios. However, these are not zero-loss businesses, nor do we price for that, and our full-year guide assumes a return to more normalized losses.

Sean Leary: On expenses, we expect 2026 to be up approximately 1%, with investment focused on our core franchises fueling revenue growth while also investing in areas like AI, cyber, servicing, and customer experiences. This disciplined expense management, along with top-line revenue growth, positions us for positive operating leverage this year and over the medium term. Building upon the momentum we saw throughout the back half of 2025, average earning assets are expected to be up between 2% and 4% year-over-year. Importantly, our growth is focused on the areas where we want to grow for attractive returns: retail auto and corporate finance. Finally, we expect an effective tax rate between 20% and 22%. We are encouraged by the momentum we've established across the businesses. We have said that achieving our mid-teens return target requires: one, an upper threes NIM; two, a sub-2% retail auto NCO rate; and three, capital and expense discipline.

On expenses, we expect 2026 to be up approximately 1%, with investment focused on our core franchises fueling revenue growth while also investing in areas like AI, cyber, servicing, and customer experiences. This disciplined expense management, along with top-line revenue growth, positions us for positive operating leverage this year and over the medium term. Building upon the momentum we saw throughout the back half of 2025, average earning assets are expected to be up between 2% and 4% year-over-year. Importantly, our growth is focused on the areas where we want to grow for attractive returns: retail auto and corporate finance. Finally, we expect an effective tax rate between 20% and 22%. We are encouraged by the momentum we've established across the businesses. We have said that achieving our mid-teens return target requires: one, an upper threes NIM; two, a sub-2% retail auto NCO rate; and three, capital and expense discipline.

Sean Leary: As Michael noted, we have achieved two of the three and see a path to achieving the third. That said, it remains a dynamic operating environment, and while reaching our targets continues to move closer, we don't feel it's prudent to call a specific quarter. We'll remain nimble and ready to pivot as the macro and competitive landscape evolves. Our focus strategy is working. I'm confident in our ability to deliver improved returns and drive long-term shareholder value. And with that, I'll turn it over to Michael for a few closing remarks. Thanks, Russ. Before heading into Q&A, I want to reiterate what we've accomplished over the past year and how that positions us for the future. First, our focus strategy has created clarity on where we will compete and how we will win. Second, we have a much stronger foundation.

Sean Leary: Our balance sheet and risk position are stronger today, giving us greater resilience and flexibility as we move forward. Our core franchises each have relevant scale, and our refined focus has streamlined resources and strengthened our competitive positioning. Third, we are executing. That means we are operating smarter, moving faster, and delivering improved efficiency and effectiveness. Earnings growth, credit performance, and capital metrics all showed meaningful progress and momentum as we head into 2026. Fourth, authorizing a $2 billion buyback program is an important step. Resuming share repurchases underscores the progress we've made and our confidence in our ability to execute moving forward. Finally, while we are encouraged by our progress, we remain focused on the road ahead.

Our balance sheet and risk position are stronger today, giving us greater resilience and flexibility as we move forward. Our core franchises each have relevant scale, and our refined focus has streamlined resources and strengthened our competitive positioning. Third, we are executing. That means we are operating smarter, moving faster, and delivering improved efficiency and effectiveness. Earnings growth, credit performance, and capital metrics all showed meaningful progress and momentum as we head into 2026. Fourth, authorizing a $2 billion buyback program is an important step. Resuming share repurchases underscores the progress we've made and our confidence in our ability to execute moving forward. Finally, while we are encouraged by our progress, we remain focused on the road ahead.

Sean Leary: There is more work to do, but I am certain we are on the right path and excited for what's ahead as we continue to execute and deliver compelling long-term value for our shareholders. With that, I'll turn it back to you, Sean, so we can head to Q&A. Thank you, Michael. As we head into Q&A, we do ask the participants limit yourself to one question and one follow-up. Lydia, please begin the Q&A. Thank you. Ladies and gentlemen, as a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the Q&A roster. Our first question coming from the line of Rob Wildhack with Autonomous Research. The line is now open. Hey, guys.

Sean Leary: Maybe just to start on the NIM, Russ, I appreciate the commentary that you gave. You said down quarter over quarter in Q1 and then sounded pretty strong on the exit trajectory. Just wanted to double-check that I heard that correctly. And then is there any more detail that you could give on what exactly drives the NIM sort of progression through the year and how it ramps from kind of down quarter over quarter to what sounds like a pretty strong exit rate? Yeah, sure. Sure, Robert. Thanks for your question. I appreciate it. Yeah, when you kind of look at the quarter-to-quarter NIM dynamic between Q3 and Q4 last year and heading into Q1 of this year, it really comes down to mainly early beta as well as some pressure from lease terminations. And so maybe I'll start on early beta.

Sean Leary: The ongoing portfolio mix dynamics that we mentioned earlier are strong and give us confidence in driving meaningful and sustainable improvement both in profitability and NIM expansion. You pointed to the NIM guide at 360 to 370 for the year. I think as you dig in and you think about where we're starting the year, it's pretty clearly implied that we expect some meaningful NIM expansion through the course of the year. Again, this kind of NIM expansion that looks kind of like the dynamics that we saw play out last year. And obviously, on a quarter-to-quarter basis, we could get some impacts, as no doubt our expectation is there will be some kind of ongoing movement in the Fed funds rate throughout the year. But again, we feel confident in terms of the medium trajectory around NIM.

The ongoing portfolio mix dynamics that we mentioned earlier are strong and give us confidence in driving meaningful and sustainable improvement both in profitability and NIM expansion. You pointed to the NIM guide at 360 to 370 for the year. I think as you dig in and you think about where we're starting the year, it's pretty clearly implied that we expect some meaningful NIM expansion through the course of the year. Again, this kind of NIM expansion that looks kind of like the dynamics that we saw play out last year. And obviously, on a quarter-to-quarter basis, we could get some impacts, as no doubt our expectation is there will be some kind of ongoing movement in the Fed funds rate throughout the year. But again, we feel confident in terms of the medium trajectory around NIM.

Sean Leary: I think as you kind of dig in on our full-year NIM expectations and then where we're starting the year, I think you'll see that we expect to end the year above the high end of our guide or approaching our high threes medium-term target. The pressure on the lease side, as we mentioned earlier, it's driven by a few hybrid electric vehicle models, the plug-in hybrid models. Those specific vehicles were impacted by an OEM recall as well as significant OEM incentives on new vehicles that came with the expiration of the EV lease tax credit. And so that's kind of what we're dealing with in terms of kind of some of this near-term NIM pressure. But again, I just reiterate our confidence in the medium term and in terms of the destination and the high threes. That's great. Thank you.

Sean Leary: And then just quickly on credit and the retail auto coverage ratio specifically, you talk a lot about the S-tier mix, vintage remixing, net charge-offs coming down, etc., etc. The retail auto coverage ratio, though, hasn't budged in like a year. Just curious what you think it would take for you to actually start releasing some of the reserves there in retail auto. Yeah, it's a fair question, Rob Wildhack. And we get that question from time to time. We've often said when we think about our returns over the medium term, as we think about our targets, we don't include reserve releases. Those are more of an output than an input from our perspective. And our focus is on just kind of managing the credit in a prudent way in terms of how we underwrite and how we service, kind of just our overall approach to the portfolio.

Sean Leary: As I think about where our reserve is set today, it's really balancing a few things. On the one hand, we're seeing clear benefits, as you said, from vintage rollover to vintages that were originated towards the end of 2023 through 2024 and now 2025 that are clearly stronger vintages from a credit perspective than what we saw in early 2023 and in 2022. So that vintage rollover is a clear benefit. We've made improvements to our underwriting. We've made improvements to our servicing. And we're seeing that benefit over time. And that's certainly something that we're seeing in terms of delinquency improving, strong float-to-loss rates. And also, we're seeing good support from the used vehicle market in terms of used car prices and severity. So all those things are incorporated in terms of how we think about reserves.

As I think about where our reserve is set today, it's really balancing a few things. On the one hand, we're seeing clear benefits, as you said, from vintage rollover to vintages that were originated towards the end of 2023 through 2024 and now 2025 that are clearly stronger vintages from a credit perspective than what we saw in early 2023 and in 2022. So that vintage rollover is a clear benefit. We've made improvements to our underwriting. We've made improvements to our servicing. And we're seeing that benefit over time. And that's certainly something that we're seeing in terms of delinquency improving, strong float-to-loss rates. And also, we're seeing good support from the used vehicle market in terms of used car prices and severity. So all those things are incorporated in terms of how we think about reserves.

Sean Leary: But again, I just reiterate, reserve releases is not something that we factor into how we think about the business from a return perspective, and it's not factored into our mid-teens return guide. Okay, thanks a lot. Thank you. And our next question coming from the line of Sanjay Sakhrani with KBW. Your line is now open. Thank you. Good morning. Maybe Michael, can we start with contextualizing 2026 as you look ahead to the year? It's obviously been a bumpy ride so far. But curious, as you look at the guidance as a whole, where do you think the biggest risks lie, the opportunities as well? Russ, you could also chime in. Yeah, Sanjay, thanks for the question. And I think about 2026. Look, I can't think about 2026 without reflecting a bit on 2025. And I'm really proud of what this team did in 2025.

Sean Leary: 2026 will be about building strong volumes with the right margins, the right pricing in the auto franchise, continuing with the momentum we have in the corporate finance business, continuing with our customer acquisitions, the strength that we have in our retail bank and our consumer bank, which, again, our balance has been relatively flat, but we're attracting a less rate-sensitive customer. So we like that dynamic, more of that. And then, of course, from a technology perspective, continue to deliver the capabilities that ensure that we win here in the 21st century and certainly for next year. And so if I take a step back, I feel really good about the fundamentals of the business. So in terms of when I think about the guide for 2026, you can kind of go line item by line item.

2026 will be about building strong volumes with the right margins, the right pricing in the auto franchise, continuing with the momentum we have in the corporate finance business, continuing with our customer acquisitions, the strength that we have in our retail bank and our consumer bank, which, again, our balance has been relatively flat, but we're attracting a less rate-sensitive customer. So we like that dynamic, more of that. And then, of course, from a technology perspective, continue to deliver the capabilities that ensure that we win here in the 21st century and certainly for next year. And so if I take a step back, I feel really good about the fundamentals of the business. So in terms of when I think about the guide for 2026, you can kind of go line item by line item.

Sean Leary: And there's something going to happen that's going to affect a lot of financial institutions, not just us, from an unemployment perspective or some other discontinuity. But I start out by talking about optimism. I'll probably end this narrative on optimism. I feel very good about how we're positioned. Yeah. I might just add, just sorry, Sanjay. You did say that I could comment as well. Absolutely. Absolutely. I might just add just as I kind of cut across the three main franchises, I feel really good about the level of dealer engagement we have. In a quarter where light vehicle sales were down, and there were all sorts of reasons and pressures, but our applications were up, and it supported our ability to be selective and underwrite a really great vintage. Similarly, when I look at the consumer bank, we added customers.

Sean Leary: And where last year we pointed to a continuation of some of these favorable indicators we were seeing getting us to the low end this year, I'd say given the persistence of those variables over the last 15 months or so, we're pricing that into the midpoint. Okay. Perfect. Thank you so much. Thank you. And our next question coming from the line of Mark DeVries with Deutsche Bank. Your line is now open. Yeah, thanks. Had a follow-up question on some of the NIM commentary. I was just wondering if we could get you to maybe quantify kind of the upper bound on what you mean by kind of the upper threes or high threes. And then just to follow up on that, I think, Russ, you indicated you expect to be the guide implies you're kind of near that run rate at the end of 2025.

Sean Leary: And so as you think about our expectation of kind of roughly two Fed cuts over the course of this year, and you kind of put on that portfolio beta and you look at where our originated yield goes versus where our portfolio yield is, I think you kind of get a good sense for why we're pointing to flattish portfolio yield over the course of the year. Okay. Great. That's helpful. And I'd also just point out while I've got you, we're also obviously looking at continued improvements to deposit pricing. One is early beta catches up. And then two, obviously, as we get further cuts, we'll look forward to further benefits in terms of deposit pricing there. And so that flattish portfolio yield is matched to declining cost of deposits, which is obviously an important driver of NIM expansion. Okay. Great. Thank you.

Sean Leary: Maybe just starting on the AOCI accretion, we currently expect, call it, $400 to 450 million per year after-tax benefit from AOCI accretion going forward. So that's on top of our reported earnings level. It's a good guy in terms of building tangible book value going forward. On the securities repositioning, that was kind of towards the end of Q1 and beginning of Q2 of last year. I'd be happy to have our IR team follow up with you and spend some time just kind of going through what we disclosed at that time about the securities repositioning. Yeah, that's obviously been kind of baked into our numbers, and from our perspective is a bit in the past. But we're happy to go through and kind of go through the dynamics of that from last year if that's helpful to you. Sure. Thank you.

Sean Leary: Thank you. Our next question coming from the line of Ryan Nash with Goldman Sachs. Your line is now open. Hey, good morning, guys. Hey, Ryan. Hey, Russ. Maybe as a follow-up to Jeff's question, maybe help us think a little bit about the pacing of buyback until we reach that 9%. Obviously, understand that it's an open-ended authorization. And I know you've been saying we're going to start slow and leg into it. But maybe just sort of contextualize how do you think about the pacing of buyback over the medium term? Yeah. It's a fair question, Ryan. Maybe I just kind of reiterate our capital priorities, right, which is first and foremost organic growth in the places we want to grow. Predominantly our retail auto book and our corporate finance book. Those are our highest returning assets.

Sean Leary: We saw some nice growth in those books over the course of 2025, and we've got good momentum going into 2026. And so our first priority is going to go to growing those businesses. And we think that's the best outcome for our shareholders in terms of driving an improvement in our profitability going forward and driving some really good IRRs for the investor. And then obviously, we've got our dividend. As you mentioned, we've got our capital built to 9%. We really see having this share repurchase authorization in place as something that gives us flexibility. It's another lever to do as we say to not chase growth for growth's sake, but to continue to be disciplined stewards of our shareholders' capital. And that's important to us. And you pointed out the 9% fully phased-in CET1 target.

We saw some nice growth in those books over the course of 2025, and we've got good momentum going into 2026. And so our first priority is going to go to growing those businesses. And we think that's the best outcome for our shareholders in terms of driving an improvement in our profitability going forward and driving some really good IRRs for the investor. And then obviously, we've got our dividend. As you mentioned, we've got our capital built to 9%. We really see having this share repurchase authorization in place as something that gives us flexibility. It's another lever to do as we say to not chase growth for growth's sake, but to continue to be disciplined stewards of our shareholders' capital. And that's important to us. And you pointed out the 9% fully phased-in CET1 target.

Sean Leary: Obviously, as we're approaching that, we will do share repurchases while we're growing capital. We are not going to be subject to the tyranny of or. Our story is a story of and. We think we can build capital, support the organic growth of our core businesses, maintain our dividend, and do share repurchases. I think as you and Jeff both pointed out, it's a fair expectation that obviously as we get through that 9% build, our share repurchase level will accelerate. So as you kind of think about it, low and slow, but doing share repurchases alongside all the other capital priorities, kind of getting through that 9%. Then obviously, it's our expectation that getting through the 9% and with our earnings levels continuing to improve, that is obviously going to support higher levels of share repurchases going forward. Gotcha.

Obviously, as we're approaching that, we will do share repurchases while we're growing capital. We are not going to be subject to the tyranny of or. Our story is a story of and. We think we can build capital, support the organic growth of our core businesses, maintain our dividend, and do share repurchases. I think as you and Jeff both pointed out, it's a fair expectation that obviously as we get through that 9% build, our share repurchase level will accelerate. So as you kind of think about it, low and slow, but doing share repurchases alongside all the other capital priorities, kind of getting through that 9%. Then obviously, it's our expectation that getting through the 9% and with our earnings levels continuing to improve, that is obviously going to support higher levels of share repurchases going forward.

Sean Leary: Maybe just as my follow-up, Russ, on slide 21, we show the new core ROTCE methodology change. Just from looking at it, it doesn't seem like there's any big change here. But I'm curious, does this change impact the timing or the level of returns that you view as the destination return for the company? No. And this is an important point. This is an updated methodology. It in no way alters our mid-teens return target, our timing, or our conviction in our ability to sustain that target over time. This is a simplification. In our view, it increases transparency and comparability. It has the benefit of aligning how we think about returns, book value, and earnings per share. And so we think this is helpful to our investors in a number of ways. But importantly, we remain confident in the sustainability of our mid-teens return targets.

Sean Leary: And as we kind of pointed out earlier, I just might point out the burn-off of AOCI obviously adds to our tangible book value per share trajectory over time on top of what we show in terms of reported EPS. Awesome. Thank you. Thank you. Our next question coming from the line of Moshe Orenbuch with TD Cowen. Line is now open. Great. Thanks. Most of my questions have been asked and answered. But maybe Michael or Russ, could you talk a little bit about the competitive dynamic? There have been some players that have come back into the market over the last year, some particularly hit hard by the end of the year. Anything that that kind of makes you do? Obviously, you noted the 10% growth in applications. But I mean, does it make you kind of look at anything different from different credit tiers or anything like that?

Sean Leary: Maybe just discuss that a little bit. Thanks. Right. Yeah. Maybe I'll jump in first. I kind of added this in the response to Sanjay's question earlier, but I feel really good about where the franchises are, in particular our Dealer Financial Services franchise. When you look at just the level of dealer engagement we're seeing, there are a lot of pressures, a lot of headwinds that we saw at the end of the year between light vehicle sales, the end of the EV lease tax credit, and some of the dynamics around pull forward that probably reversed a little bit in the fourth quarter. But as you pointed out, our application volume was strong, and it supported our credit selectivity and our ability to get what I think is a really great vintage in the fourth quarter. That really comes from just the strength of the overall franchises.

Russell Hutchinson: Thanks. Right. Yeah. Maybe I'll jump in first. I kind of added this in the response to Sanjay's question earlier, but I feel really good about where the franchises are, in particular our Dealer Financial Services franchise. When you look at just the level of dealer engagement we're seeing, there are a lot of pressures, a lot of headwinds that we saw at the end of the year between light vehicle sales, the end of the EV lease tax credit, and some of the dynamics around pull forward that probably reversed a little bit in the fourth quarter. But as you pointed out, our application volume was strong, and it supported our credit selectivity and our ability to get what I think is a really great vintage in the fourth quarter. That really comes from just the strength of the overall franchises.

Sean Leary: We are consistent supporters of our dealer partners over time and across all aspects of their business. We have a value proposition that's attractive and helps them in the many aspects of running a better dealership. And that the strength of those relationships and that engagement translates directly into the application volume that really is the lifeblood of that business. And so it isn't. This is an attractive business. And if anything surprised us, it's that it took until this year before a number of our competitors realized how attractive it is. And so we expected that competition. And we're pleased with how the business has responded and continued to really excel in the face of it. Russ and Ray, thanks for that. Russ and Moshe. Great question. And yeah, this competitive marketplace is just a sign of how great the business that we have.

Sean Leary: If you take away, there's been a lot on this call, and I'm going to take your question and kind of frame it with respect to a lot of what's going on. The competition was more intense this year, but incredibly proud of this team. And this team showed up in a big way. The strength of relationships that we have, certainly in the auto business and the corporate finance business, and the way we've delivered. This whole year has been about strategic pivots backed by disciplined execution. We talk about the fact that we have solid results. This was a very good year. And I use the word solid because as good as we've done, we know there's a path to better. And I think, Russ, you talked a lot about that. But we have momentum. You feel good about how this business is playing out.

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Q4 2025 Ally Financial Inc Earnings Call

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Q4 2025 Ally Financial Inc Earnings Call

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