Safe and Sound

Ally Bank

Midvale, UT
5
Star Rating
Started in 2004, Ally Bank is an FDIC-insured bank headquartered in Midvale, UT. The bank has equity of $18.87 billion on assets of $126.00 billion, according to June 30, 2017, regulatory filings.

Thanks to the work of 6,880 full-time employees, the bank holds loans and leases worth $95.37 billion, including $15.10 billion worth of real estate loans. The bank currently holds $86.26 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, Ally Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a buffer against losses and provides protection for depositors during periods of financial trouble for the bank. When it comes to safety and soundness, the more capital, the better.
Ally Bank racked up 20 out of a possible 30 points on our test to measure capital adequacy, better than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Ally Bank's Tier 1 capital ratio was 17.89 percent, higher than the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Ally Bank held equity amounting to 14.97 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets may eventually force a bank to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the chances of a future failure.

Ally Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of June 30, 2017, 0.34 percent of Ally Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Ally Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's earnings test, Ally Bank scored 18 out of a possible 30, better than the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Ally Bank was 8.33 percent, below the national average of 9.28 percent.

The bank reported net income of $764.0 million on total equity of $18.87 billion for the twelve months ended June 30, 2017. The bank reported an annualized return on average assets, or ROA, of 1.23 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 percent.








WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.