Ally Says 25% of Customers Have Asked for Help With Auto Loans

(Bloomberg) -- Ally Financial Inc. said 25% of its auto-loan customers have asked for payment deferrals, and the vast majority have never been delinquent before.

Of the 1.1 million borrowers who requested forbearance, more than three-quarters have never asked for a deferral before and 70% have never had a late payment with Ally, Chief Financial Officer Jennifer LaClair told analysts during a conference call Monday.

“We believe participation in this program will lower loss content,” LaClair said. “We will be able to track leading indicators of default and intervene early.”

Ally was among U.S. banks that rolled out forbearance programs to try to stem loan losses as much of the country remains under shelter-in-place orders for the coronavirus pandemic. The firm said it’s increasing its servicing staff capacity to prepare for when the payment deferrals end.

Integration work for its purchase of the subprime credit-card issuer CardWorks is under way, the company said. The deal was announced in February at a $2.65 billion valuation, and Ally’s stock has tumbled 53% since then. The merger agreement includes a provision that allows CardWorks to back out if Ally’s share price declines significantly, but the buyer could respond with a higher offer.

Ally Chief Executive Officer Jeffrey Brown declined to comment Monday on whether his company would consider raising the bid to compel CardWorks to complete the deal.

“Our team didn’t expect a severe drop-off or fall-off in the economy to come,” Brown said. “We’re going through the process now. We’ll make the right decisions on both sides that are thoughtful for our shareholders and our customers for the long term.”

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