The banking industry is one area of the stock market that is now brimming with extremely appealing chances.
Ally Financial (NYSE:ALLY) is a financial company that many investors are unfamiliar with. Still, the fast-growing Ally stock (NYSE:ALLY) seems to be an extraordinarily inexpensive yet good long-term investment.
Ally is a Very Lucrative Fintech Firm.
Ally is an online-only bank that provides a comprehensive variety of loans, deposit products, brokerage services, and other financial services, focusing on car loans and high-yield savings accounts. Ally was General Motors’ banking division before the financial crisis, thus the emphasis on car loans. In fact, with over $106 billion in outstanding vehicle loans and lease amounts, Ally is the biggest prime auto lender in the United States.
During the second quarter alone, Ally originated $13.3 billion in car loans, the bank’s biggest volume in more than 15 years. It has an insurance division to supplement its car loans, more than $130 billion in client deposits, a brokerage division with $13.5 billion in assets, a rapidly rising corporate financing division, and more. Ally has almost 10 million clients that utilize at least one of its banking products, and it is the biggest all-digital bank in the United States.
Ally Financial is a very successful and efficient company. It benefits from the comparatively high-interest rates on vehicle loans and the cheap cost of capital provided by its vast deposit base and online-based business. In fact, the typical vehicle loan generated by Ally in the second quarter offers a 7.8% return, while the bank paid just 0.76% on its vast deposit base. Even with a loan loss rate of 2% to 3%, this is still a significant margin.
A slowdown in consumer spending, persistent supply chain concerns in the car sector, and worries of a future recession may all lead loan volumes to fall and defaults to rise in the coming quarters. However, this is a stable firm with a cushion for bad times.
Ally Stock: A Fantastic Income and Growth Stock, but You Must Be Patient.
Long-term, Ally stock (NYSE:ALLY) seems to be quite appealing. Even if there are a few bad quarters ahead, the bank should stay profitable, and the long-term economics seem good. Furthermore, the emphasis on returning the money is outstanding, particularly regarding buybacks.
However, anticipate significant volatility in the short future. The auto lending market is cyclical, and as recession worries are high, inflation persists, and the car industry continues to face supply chain challenges, Ally stock (NYSE:ALLY) is likely to take investors on a roller-coaster ride. However, it might be a long-term home run for those prepared to wait, so I intend to maintain my position in Ally stock at current prices.
Featured Image- Unsplash @ Yiorgos Ntrahas
Author Okoro Chinedu 
