Dive Brief:

• Ally Financial reported a 58% earnings drop, as its core auto lending business suffered from closed dealerships, the company said on its second-quarter earnings call.

• Ally, the 17th-largest U.S. bank, saw an 8.9% net financing revenue decline for the quarter on a 35% drop in new car sales, the most in one quarter since the Great Recession, according to CFO.com. Despite the decline, company CEO Jeffrey Brown said on the earnings call its auto finance business "saw meaningful improvement" towards the end of the quarter.

• "We saw steady improvement [once] shelter-in-place orders eased," CFO Jennifer LaClair told analysts on the call. "Ally's application trends steadily improved, reaching the highest level on record, reflecting supply dynamics and a shift in consumer preferences that fit our model."

Dive Insight:

In the first quarter, Ally suffered a $319 million net loss, compared to a $374 million net profit this time last year. The bank said it has set aside more than $900 million for credit loan losses, but in the second quarter, it reserved only $287 million. LaClair said the bank has seen strong payment rates among its customers, not only in retail auto but also in mortgage and Ally Lending.

Also in the second quarter, Ally generated its 10th consecutive quarter of 96% customer retention rate, LaClair said, adding that its customer growth of 94,000 pushed the bank to more than 2.1 million customers, nearly double its 2016 levels.

"Actual credit performance has been stronger than anticipated," LaClair said. "And while much remains unknown about the ongoing economic environment, stimuli support programs and proactive customer engagement actions have driven encouraging trends. ... Robust payment activity occurred across our non-deferred customers, materially lowering frequency year-over-year."

With consumers forced to refrain from in-person transactions, many digital banks are hitting their stride, and Ally says it's part of that trend. "Ally has positioned itself, with our digital capabilities, [to] continue winning," she said. "There's no doubt that direct banks are going to continue to win in this environment.”

Brown said he and his team have “diligently and purposely built Ally upon pillars of strength to prepare for turbulent times, and being able to navigate the full economic cycle," despite having to call off Ally's planned $2.7 billion acquisition of CardWorks, called off in June, CFO.com reported.

"We take great pride in being a comprehensive and digitally-focused consumer and commercial finance provider, and we will continue innovating and adapting," he said. "We have a strong, well-positioned balance sheet with a deeply rooted foundation across funding, capital and liquidity that will ensure we remain a source of strength for customers over the long term."