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Investing.com - Citi maintained its Buy rating and $55.00 price target on Ally Financial (NYSE:ALLY) stock on Monday, highlighting what it sees as compelling valuation upside potential. Currently trading at $36.94, ALLY sits within a broader analyst target range of $30-$56, according to InvestingPro data.
The investment bank noted that ALLY currently trades at 1.0x tangible book value (TBV), which it believes offers significant upside given an estimated 30% two-year TBV growth plus 14-15% return on tangible common equity (ROTCE) outlook in 2026 and 2027. Citi suggests this performance deserves a 1.2x TBV multiple or 20% expansion. This aligns with the stock’s current Price-to-Book ratio of 0.95 and attractive 3.25% dividend yield, which has been maintained consistently for 10 consecutive years.
Citi pointed to net interest margin (NIM) and credit tailwinds that have been outlined by management, including high 3% NIM range and auto net charge-offs (NCO) below 2%. The firm expects management to maintain its 2025 NIM guidance of 3.40-3.50%, which implies a 3.60% exit run rate in the fourth quarter compared to an implied second-quarter guidance of approximately 3.30%.
On auto net charge-offs, Citi’s vintage curve analysis indicates potential for losses at the lower end of the 200-225 basis points guidance for 2025. The bank views the upcoming second quarter as a potential proof point that management is on track with its projections.
Citi identified one weak spot in Ally’s fully phased-in Common Equity Tier 1 (CET1) ratio of 7.3% in the first quarter, but forecasts improvement to 7.7% by the second quarter of 2025 and further strengthening to 8.4% by the second quarter of 2026. For deeper insights into ALLY’s financial health metrics and additional exclusive analysis, check out the comprehensive research report available on InvestingPro, which offers detailed assessment of the company’s strengths and potential risks.
In other recent news, Ally Financial has reported the results of its annual shareholder meeting, where all director nominees were elected, and an advisory vote on executive compensation received majority approval. The ratification of Deloitte & Touche LLP as the company’s independent auditor for 2025 also passed with strong support. Additionally, Ally Financial announced the appointment of Michelle J. Goldberg to its Board of Directors, bringing extensive experience in technology and investment banking to the team. This board transition is part of Ally’s ongoing efforts to enhance its governance and strategic direction.
In terms of financial performance, Morgan Stanley (NYSE:MS) analysts have reiterated their Overweight rating on Ally Financial, maintaining a price target of $39.00. They highlighted the company’s focus on achieving medium-term objectives, including a high-3% net interest margin and a mid-teens core return on tangible common equity. Meanwhile, Citi analysts reaffirmed a Buy rating with a $55.00 price target, expressing confidence in Ally’s ability to meet its financial targets despite market skepticism. Citi’s analysis points to Ally’s path to improved returns as becoming more evident.
Ally CEO Michael Rhodes also shared insights at the Bernstein Conference, noting that tariffs could positively impact used-car prices and repossessed vehicle values in the short term. However, Rhodes emphasized a cautious approach, particularly in relation to the retail auto book. While share buybacks remain part of Ally’s strategic plan, the company is not yet ready to initiate this activity, focusing instead on maintaining financial discipline.
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