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The interest rate on 30-year government bonds, which sets a benchmark for borrowing costs across the economy, rose back to levels not seen in nearly two decades. This move was driven by a stronger-than-expected manufacturing report and rising oil prices, both of which suggest inflation may stay higher for longer.
For a lender like Ally, higher long-term rates are a double-edged sword. While they eventually allow the company to charge more for auto loans, they also increase the cost of the money Ally borrows to fund those loans. If these rates stay high, it could squeeze the profit margin between what Ally pays for its funding and what it earns from borrowers.
Source: Bloomberg Markets and Finance
Cleveland Federal Reserve President Beth Hammack stated that the central bank should raise interest rates right away to bring down inflation. The Federal Reserve is the group that sets the cost of borrowing in the U.S. to keep the economy stable.
For a company like Ally, which makes most of its money from car loans, higher rates are a double-edged sword. While they can charge more for loans, higher rates also make it more expensive for Ally to borrow the money it lends out and can make it harder for customers to keep up with their monthly payments.
Source: Reuters
Wholesale prices, which track what businesses pay for goods before they reach consumers, remained unchanged in July. This is a sign that the rapid rise in the cost of living may be slowing down. Lower inflation generally makes it easier for the Federal Reserve to eventually lower interest rates. For Ally, a cooling economy with lower rates is usually helpful because it lowers their own borrowing costs and reduces the risk that car buyers will fall behind on their loans.
Source: Market Watch
Ally was named the best overall online bank by the Wall Street Journal for the fifth year in a row. It also ranked sixth on the Forbes list of the world's best banks. These recognitions help confirm that Ally is maintaining its lead in digital banking even as traditional banks try to catch up.
Source: PRNewsWire
Neuberger Berman reduced its target for the stock price by about 8 percent. This move came shortly after the company reported its second-quarter earnings. Even with the lower target, the firm still sees the stock as worth more than its current price of about $45.
Source: Neuberger Berman
Ally has a habit of clearing the bar, beating analyst profit targets in seven of the last eight quarters. This suggests management is conservative with its forecasts and executes well.
| Expectation | |
|---|---|
| EPS | $1.43 |
| Revenue | $2.32B |
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