- Key Insight: Ally CEO Michael Rhodes says the key to the company's growing profits has been simplifying its business model, doubling down on core businesses and eliminating noncore ones.
- Supporting Data: In the first quarter of 2026, Ally's net income grew 42% year over year.
- Expert Quote: "Being focused does not mean being smaller. There's so much room for growth in what we're doing." — Rhodes
Not long after Michael Rhodes became CEO of Ally Financial, he decided the company needed a strategic U-turn.
The Detroit-based auto lender had bet big on branching out, expanding into noncore businesses like mortgages and credit cards. But Rhodes believed what it needed was the opposite: a leaner business model, concentrating on what the company did best.
"It is a bit of a pivot, let's be honest," Rhodes told American Banker. "We had this strategic thrust that we're trying to diversify the business, and I went from diversification to being focused."
Rhodes, who had previously been the CEO of Discover Financial Services, took the helm at Ally in April 2024. The company had just weathered a tough
By the end of 2024, Rhodes was promising investors that Ally "
Two years later, by many measures, that prediction has come true. In the
How Ally turned things around, Rhodes said, had a lot to do with what he calls "the power of focus."
"Being focused does not mean being smaller," Rhodes said. "There's so much room for growth in what we're doing."
It's an approach that has been welcomed by some investors, particularly those familiar with Ally's past. The company has tried its hand at mortgages more than once, with sometimes disastrous results. In 2008, Ally's mortgage subsidiary at the time, ResCap, suffered such heavy losses amid the subprime lending crisis that Ally required a
"For a company that's viewed as a monoline, it's also had a history of side projects that get them in trouble," said Brian Foran, an analyst at Truist Securities. "So I think people appreciate having the focus, saying, 'Here are the three or four things we're good at."
Cutting the card
When Rhodes joined Ally, the company had six major business segments: auto lending, its online bank, insurance, corporate finance, mortgages and credit cards. Less than a year into his tenure, he concluded that Ally should drop cards and mortgages.
It was a tough decision — especially since the bank had just
"A new person comes in and makes a bit of a pivot," Rhodes recalled thinking. "Are they going to lean in or not?"
At the time, the performance of those two businesses was a mixed bag. In the fourth quarter of 2024, consumer mortgage loans had declined by about 8% year over year, while credit card loans had actually grown by 15%.
In Rhodes' view, neither segment was failing. It was just that Ally's capital, he believed, would be much better spent on the businesses where it truly excelled — particularly auto lending.
"Strategy is about choices, and so sometimes you have to choose between good alternatives," the CEO said. "I just saw [that] a dollar of investment in our auto franchising, corporate finance and the retail bank is going to get me much more leverage than it will for the card business."
In the end, Rhodes said, the board supported his plan "100 %." In January 2025, Ally stopped issuing new mortgages and agreed to sell its credit card business, comprising $2.3 billion in loans and 1.3 million customers, to the subprime lender CardWorks.
"We went back and forth a fair amount on this, but I had a lot of conviction around it," Rhodes said.
For his part, Truist's Foran believes dumping credit cards and mortgages made sense for Ally. After the COVID-19 pandemic, when interest rates plummeted, mortgages became a "big drag" on many lenders' net interest margins.
"It probably was the right decision," Foran said. "There's no inherent reason why Ally should be a winner in the mortgage business."
As for credit cards, Foran's thinking is similar to Rhodes': He just doesn't see the segment as the best possible use of Ally's resources — especially in a business that typically requires heavy losses upfront.
"The credit-card business is super profitable once you get to the other side," Foran said. "But building a credit-card business, either de novo or buying something small and trying to scale it, is oftentimes a lot harder than people think."
All in on auto
After shedding cards and mortgages, Ally doubled down on its bread and butter: auto lending. It's a business that the company has been doing since 1919, when it was part of General Motors, and still makes up the majority of its revenue.
Today Rhodes fondly recalls the reactions he got when he told car dealers, with whom Ally works closely, that the company was getting out of the mortgage and credit card businesses.
"I actually met with a bunch of our dealers shortly after that, and the fact that we exited … was really warmly embraced," Rhodes said. "They love the fact that we're all in."
That close collaboration appears to be getting results. Starting in 2025, Ally has repeatedly seen
The renewed focus has appealed to some investors, though not all. Since Rhodes took over at Ally, the company's stock has risen about 9%. In the same time frame, the KBW Nasdaq Bank Index, which tracks 24 leading U.S. banks, has risen about 65%.
The fact that troubles some investors about Ally, Foran said, is that with greater concentration on one business comes more dependence on it.
"You don't want to be so concentrated that you're at the whims of the cycle for that product," he said. "So maybe down the road there's an argument to be more diversified."
For now, however, Ally's streamlining appears to be paying off. In the first quarter of 2026, the company's total net revenue reached $2.1 billion, up 36% year over year.
And if focusing on auto lending makes Ally unusual, Rhodes sees that as a plus.
"We are not like other banks, and we're very proud of that," Rhodes said. "We've got a national brand and a consumer bank, and are very good in our lending categories, and I don't really see anyone quite like us."
