Banking

Ally Financial CEO talks GM, Charlotte and HB2

Jeffrey Brown, who is based in Charlotte, on Tuesday sat down with the Observer for a wide-ranging interview on his first year as CEO. He called North Carolina’s new LGBT bill ‘unfortunate’ for Charlotte and the state.
Jeffrey Brown, who is based in Charlotte, on Tuesday sat down with the Observer for a wide-ranging interview on his first year as CEO. He called North Carolina’s new LGBT bill ‘unfortunate’ for Charlotte and the state. jsiner@charlotteobserver.com

In his first year as CEO of Ally Financial, Jeffrey Brown has had to deal with activist shareholders, a depressed stock price and losing a lucrative deal with General Motors Co.

But in a wide-ranging interview with the Observer on Tuesday, he pointed to steps he has taken to diversify how the Detroit-based company makes money beyond its long dependence on auto lending. While still one of the top U.S. auto lenders, the company has previously announced plans to add credit card and mortgage products later this year.

“We saw the need about a year ago to really focus on other avenues of growth and opportunities for diversification,” said Brown, 43, who is based in Charlotte. The diversification comes at a time when auto lending remains a core focus for Ally, but one he said is also expected to be a relatively flat business in the future.

As the head of a company that considers Charlotte one of its top employment hubs, Brown also weighed in on North Carolina’s controversial new public accommodations law known as House Bill 2. The law, among other provisions, restricts legal protections for the state’s lesbian, gay, bisexual and transgender people. Ally said in a statement Tuesday that the company supports policies that uphold diverse and inclusive workplaces, adding that HB2 is not reflective of Ally’s values.

It’s been unfortunate for our people that our government really can’t just embrace an open culture.

Ally Financial CEO Jeffrey Brown, speaking about North Carolina’s public accommodations law

Brown called the bill “unfortunate.” He said an important mandate he’s had as CEO is to ensure Ally provides a work environment that embraces diversity of all kinds.

“It’s been unfortunate for the city of Charlotte, it’s been unfortunate for the state of North Carolina, and it’s been unfortunate for our people that our government really can’t just embrace an open culture,” Brown said.

The interview came on the same day Ally reported financial results for the first three months of this year. Net income fell 57 percent to $250 million, compared with $576 million a year ago. The year-ago results benefited from the sale of a Chinese auto finance joint venture.

Adjusted earnings per share were 52 cents, 1 cent lower than analyst estimates compiled by Bloomberg. Ally’s $1.33 billion in revenue was 22 percent higher from a year earlier, as the company added loans and deposits. Ally had auto-loan originations of $9 billion in the first quarter, down from $9.8 billion a year ago.

Here are excerpts from the interview:

On his first year as CEO

Brown, named to the position in February 2015 to replace retiring CEO Michael Carpenter, called his first year as chief executive “great,” noting the work Ally has done to implement its “slow, modest” diversification strategy.

One new area Brown is targeting is wealth management. Ally is entering that business with its pending purchase of Florida online broker TradeKing Group.

Brown also highlighted growth in Ally’s deposits, which have surpassed $70 billion. Those gains come as Ally continues to operate an online-only bank with no branches.

In addition, Brown pointed to new employee benefits Ally has added during his tenure as CEO, including the introduction last year of paid parental leave of up to 12 weeks at 100 percent of pay. This year, other big banks have announced plans to begin offering parental leave or expand existing policies.

Brown came on board as Ally was dealing with the loss of its exclusive lease agreement with General Motors, but he said the company is adapting. Ally, formerly the financing arm of General Motors, is now an independent company that began publicly trading in 2014.

“In some respects, it was a great thing that happened,” Brown said, “because it really allowed the universe of dealers as well as other (automakers) to finally view Ally as truly independent.”

On Ally’s stock price

CEO Jeffrey Brown continues to face investor pressure to raise Ally Financial’s stock price. The stock debuted in April 2014 at an initial public offering price of $25 a share. On Tuesday, it closed at $18.47.

Brown continues to face investor pressure to make progress in another area: Ally’s stock price.

The stock debuted in April 2014 at an initial public offering price of $25 a share. On Tuesday, it closed at $18.47.

The stock’s performance was one factor cited by a hedge fund that last year pushed for Ally to form a strategic alternatives committee, a move Ally said would be widely regarded as a decision to pursue a sale. The hedge fund has since settled its dispute after Ally agreed to appoint a new independent director.

Brown said he tries not to focus on the stock price “day in and day out.” At the same time, he said he’s disappointed with the price.

“For me, the job of the CEO is to focus on long-term value creation and really ensure operational excellence,” he said. “And I think through time that ultimately will drive the stock price.”

On Ally’s future in Charlotte

Ally employs roughly 800 in Charlotte, which is one of its corporate centers, along with New York. The TradeKing deal is expected to expand Ally’s Charlotte employment to more than 900, the bank has said.

Charlotte is where some of Ally’s top executives, including its chief financial officer, are based. Ally’s chief risk officer is also planning to move to Charlotte from Detroit. Charlotte can expect to benefit from Ally’s modest employment growth, just as Ally’s other top locations can, Brown said.

“But we have no grand plans to see Charlotte double or triple in size,” he said. “For us, we’re comfortable with the size of the footprint.”

Ally’s locations in Charlotte, where it has offices in an uptown tower and SouthPark, are at capacity, he added.

Deon Roberts: 704-358-5248, @DeonERoberts

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