Is General Motors' Bank Approval a Game Changer for Funding?

General Motors Company GM got approval for its industrial bank application in January, marking a significant step in expanding its funding capabilities. Industrial banks operate under regulatory frameworks similar to those of traditional banks but with a narrower scope. They enable companies to accept deposits insured by the Federal Deposit Insurance Corporation into savings accounts, which automakers were previously unable to do. These deposits can generate earnings while offering consumers additional savings opportunities.

The development comes after years of planning and at a time when vehicle affordability remains a key concern in the automotive industry. In the United States, average transaction prices hover around $50,000, and nearly half of auto loan borrowers are opting for terms longer than six years, per LendingTree.

The conditional approval is expected to complement GM Financial’s existing funding platform rather than replace it. By introducing products such as high-yield savings accounts and brokered deposits, the bank will provide an additional funding channel.

As it scales, this complementary structure is anticipated to gradually reduce funding costs by several basis points, an outcome that could have a meaningful impact on the company’s broader debt profile over time. GM carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Apart from General Motors, Ford Motor Company F has received conditional approval to establish an industrial bank. Deposits held at Ford Credit Bank could be used to finance vehicle purchases, accessories, EV chargers, software upgrades and related offerings. The company plans to provide certificates of deposit and indirect financing for Ford and Lincoln vehicles through its dealer network. Its broader aim is to deliver a seamless customer experience, making financing through Ford Credit Bank feel no different from using its traditional Ford Credit arm.

In contrast, Toyota Motor Corporation TM already operates an industrial bank in the United States, Toyota Financial Savings Bank. Established in 2004 in Henderson, NV, it is an FDIC-insured institution that offers conventional banking products to eligible Toyota and Lexus dealers, employees and their family members across the country.

GM’s Price Performance, Valuation and Estimates

General Motors has outperformed the Zacks Automotive-Domestic industry. Its shares have gained 23.3% compared with the industry’s growth of 1%.

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From a valuation perspective, GM appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.35, lower than the industry’s 3.22.

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The Zacks Consensus Estimate for GM’s 2026 and 2027 EPS has moved up a penny and 9 cents, respectively, in the past 30 days.

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This article originally published on Zacks Investment Research (zacks.com).

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