AInvest Newsletter
Daily stocks & crypto headlines, free to your inbox
Wells Fargo upgrades Ally Financial to Equalweight, citing improved interest rate risk and positive auto credit trends.
ByAinvest
Wednesday, Sep 3, 2025 4:54 am ET1min read
Wells Fargo upgraded Ally Financial to Equalweight from Underweight, citing diminishing interest rate tail risk and positive auto credit trends. This bodes well for increased stock buybacks in 2026. Ally Financial's consumer finance sector has been viewed constructively, but caution was exercised due to concerns about interest rate risks.
Wells Fargo has upgraded Ally Financial (NYSE:ALLY) to Equalweight from Underweight, citing diminishing interest rate tail risk and positive auto credit trends. The upgrade comes as the Federal Reserve is poised to cut rates, which could benefit Ally's net interest margin (NIM) and potentially lead to increased stock buybacks in 2026.Analyst Donald Fandetti, who authored the note to Wells Fargo clients, noted that the company's interest rate risk has diminished, and auto credit trends have improved. He highlighted that even modest Fed cuts would be a tailwind for NIM, as auto loans are fixed-rate and funded with deposits. Ally Financial's 2025 NIM guidance is 3.4%-3.5%, providing room for a slight upside, with every +10 basis points of NIM adding ~10% to Ally's earnings per share (EPS).
Fandetti also pointed out that Ally Financial's auto loan delinquencies are tracking slightly better than internal expectations, which could lead to higher guidance for net charge-offs and NIM in the near term. The higher rates impacting accumulated other comprehensive income (AOCI) have kept Ally Financial's share repurchases on hold. However, with potentially lower rates and progress made on capital, Fandetti sees stock buybacks "back on the table" likely in early 2026, constituting a positive catalyst.
Wells Fargo's Equalweight rating on Ally contrasts with the SA Quant rating of Strong Buy, the average SA Analyst rating, and the average Wall Street rating, all at Buy. Despite the rating upgrade, Ally's stock dropped 1.7% in Tuesday midday trading.
References:
[1] https://seekingalpha.com/news/4491261-ally-financial-upgraded-to-equalweight-at-wells-fargo
Ainvest News articles are AI-generated using advanced large language model (LLM) technology designed to analyze and synthesize publicly available data and news. While AI tools assist in producing initial drafts and insights, all AI generated content published on Ainvest is subject to comprehensive human editorial review before publication. A designated human editor reviews, verifies, and approves each article for factual accuracy, coherence, and compliance with AInvest Fintech Inc’s editorial and disclosure standards.
Despite these review procedures, the information provided may still contain inaccuracies, incomplete data, or time sensitive references due to the inherent limitations of AI generated analysis and evolving changes. The material is provided strictly for informational and educational purposes and does not constitute personalized investment, legal, or financial advice. Readers should independently verify all facts, figures, and statements before making any decision based on this content.
AInvest Fintech Inc. its affiliates, and partners accept no liability or responsibility for any direct or consequential losses arising from reliance on this content. All articles and analyses are subject to revision, update, or removal without prior notice to maintain accuracy and integrity in our publications.
Comments
No comments yet