Ally Financial ALLY is considering selling its credit card business. This was reported by Bloomberg, citing persons familiar with the matter.
ALLY shares rose and closed Friday’s trading session up 1.8%.
Bloomberg noted that Ally Financial is working with a financial advisor to find buyers for the business. As of Sept. 30, 2024, the company had $2.13 billion in average credit card loans, with 1.25 million active cardholders.
Ally Financial has a long history with the credit card business. Before 2019, the company partnered with The Toronto-Dominion Bank TD to offer the Ally CashBack credit card. However, in June 2019, the company stopped onboarding new customers to pare losses in its underperforming card portfolio. Effective 2020, TD changed these cards to the TD Bank Cash Credit Card.
In February 2020, ALLY announced a deal to buy subprime credit card lender Cardholder Management Services, Inc. (CardWorks). However, the coronavirus pandemic upended the company’s plan. Both companies agreed to mutually terminate the $2.65 billion deal “after carefully considering the meaningful impacts of COVID-19 on global markets and the economy” in June 2020.
In December 2021, Ally Financial acquired Fair Square Financial, a digital-first credit card company, for $750 million. At that time, Fair Square had roughly 693,000 cardholders and $816 million in loan balances.
Now, almost three years after this buyout, Ally Financial, facing stiff competition from the larger card provider Capital One COF, is mulling a retreat from the business. COF’s deal to acquire Discover Financial will make later bigger.
Ally Financial, the country’s leading auto lender, is trying to focus on its core business, which includes auto finance and digital banking. In sync with this, it sold its point-of-sale financing business, Ally Lending (which included $2.2 billion of loan receivables as of Dec. 31, 2023) in March 2024. This transaction was part of the company’s broader initiative to invest resources in growing scale businesses and strengthen relationships with dealer customers and consumers.
ALLY has been undertaking steps to bolster profitability amid a challenging operating backdrop. Last year, the company trimmed its headcount, leading to $80 million of annualized expense savings.
Its strategy to diversify into other businesses is supporting top-line growth. Ally Financial has expanded into the mortgage, wealth management and online brokerage businesses. In 2023, the company launched Ally.ai, a proprietary, cloud-based artificial intelligence (AI) platform that allows it to integrate any AI capability into business operations at an enterprise scale.
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