Ally Bank 2012 Annual Report Download - page 6

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crisis, we have reduced our overall mortgage assets from $135.1 billion in 2006 to $14.7 billion at December 31, 2012, primarily through the
run-off and divestiture of noncore businesses and assets, and the deconsolidation of ResCap.
Corporate and Other
Corporate and Other primarily consists of our centralized corporate treasury activities, such as management of the cash and corporate
investment securities portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, the amortization of
the discount associated with new debt issuances and bond exchanges, most notably from the December 2008 bond exchange, and the residual
impacts of our corporate funds-transfer pricing (FTP) and treasury asset liability management (ALM) activities. Corporate and Other also
includes our Commercial Finance Group, certain equity investments, reclassifications and eliminations between the reportable operating
segments, and overhead that was previously allocated to operations that have since been sold or classified as discontinued operations. Our
Commercial Finance Group provides senior secured commercial-lending products to primarily U.S.-based middle market companies.
Ally Bank
Ally Bank raises deposits directly from customers through direct banking via the internet, telephone, mobile, and mail channels. Ally
Bank has established a strong and growing retail banking franchise that is based on a promise of being straightforward, easy to use, and
offering high-quality customer service. Ally Bank's products and services are designed to develop long-term customer relationships and
capitalize on the shift in consumer preference away from branch banking in favor of direct banking.
Ally Bank provides us with a stable and diversified low-cost funding source. At December 31, 2012, we had $46.9 billion of deposits
including $35.0 billion of retail deposits sourced by Ally Bank. The focus on retail deposits and growth in our deposit base from $19.2 billion
at the end of 2008 to $46.9 billion at the end of 2012, combined with improving capital markets and a lower interest rate environment have
contributed to a reduction in our cost of funds of approximately 95 basis points since the first quarter of 2011. We expect to continue to lower
our cost of funds and diversify our overall funding as our deposit base grows.
We believe Ally Bank is well-positioned to continue to benefit from the consumer driven-shift from branch banking to direct banking.
According to a 2012 American Bankers Association survey, the percentage of customers who prefer to do their banking via direct channels
(internet, mail, phone, and mobile) increased from 21% to 62% between 2007 and 2012, while those who prefer branch banking declined
from 39% to 18% over the same period. Ally Bank has received a positive response to innovative savings and other deposit products. Ally
Bank's products include savings and money market accounts, certificates of deposit, interest-bearing checking accounts, and individual
retirement accounts. Ally Bank's competitive direct banking features include online and mobile banking, electronic bill pay, remote deposit,
electronic funds transfer, and no-fee debit cards.
Industry and Competition
The markets for automotive and mortgage financing, banking, and insurance are highly competitive. The market for automotive
financing has grown more competitive as more consumers are financing their vehicle purchases and as more competitors continue to enter this
market as a result of how well automotive finance assets generally performed relative to other asset classes through the economic cycle during
the past several years. More recently, competition for automotive financing has further intensified as a growing number of banks have become
increasingly interested in automotive-finance assets. In addition, Ally Bank faces significant competition from commercial banks, savings
institutions, and other financial institutions. Our insurance business also faces significant competition from automotive manufacturers,
insurance carriers, third-party administrators, brokers, and other insurance-related companies. Many of our competitors have substantial
positions nationally or in the markets in which they operate. Some of our competitors have lower cost structures, substantially lower costs of
capital, and are much less reliant on securitization activities, unsecured debt, and other public markets. We face significant competition in
most areas, including product offerings, rates, pricing and fees, and customer service. Further, there has been significant consolidation among
companies in the financial services industry, which is expected to continue.
The markets for automotive securitizations and whole-loan sales are also competitive, and other issuers and originators could increase
the amount of their issuances and sales. In addition, lenders and other investors within those markets often establish limits on their credit
exposure to particular issuers, originators, and asset classes, or they may require higher returns to increase the amount of their exposure.
Increased issuance by other participants in the market or decisions by investors to limit their credit exposure to (or to require a higher yield
for) us or to automotive securitizations or whole-loan sales could negatively affect our ability and that of our subsidiaries to price our
securitizations and whole-loan sales at attractive rates. The result would be lower proceeds from these activities and lower profits for our
subsidiaries and us.
Certain Regulatory Matters
We are subject to various regulatory, financial, and other requirements of the jurisdictions in which our businesses operate. In light of
recent conditions in the global financial markets, regulators have increased their focus on the regulation of the financial services industry. As a
result, proposals for legislation or regulations that could increase the scope and nature of regulation of the financial services industry are
possible. The following is a description of some of the laws and regulations that currently affect our business.
Bank Holding Company Status
Ally Financial Inc. (Ally) and IB Finance Holding Company, LLC (IB Finance) are currently both bank holding companies under the
BHC Act. IB Finance is the direct holding company for Ally's FDIC-insured depository institution, Ally Bank. As a bank holding company,
Ally is subject to supervision, examination and regulation by the Board of Governors of the Federal Reserve System (FRB). Ally must also
Table of Contents Ally Financial Inc. • Form 10-K