Ally Financial was added to the Citi Focus List as a Top Pick by Investing.com

Investing.com — Ally Financial (NYSE: ) was added to Citi’s Focus List as a top pick, the bank said in a note Monday.

“We believe ALLY is well positioned to benefit from improving credit and an expanding net interest margin (NIM),” Citi said, despite concerns raised during a recent mid-quarter update.

The investment bank’s analysis forecasts significant growth in ALLY’s NIM in a lower interest rate environment.

They assume the Federal Reserve will cut the Fed Funds rate by about 230 basis points (bps) to 3% by the end of 2025.

Citi explains that this reduction would result in 85 bps of revaluation of floating rate assets, net of swaps, but would be offset by 20 bps of revaluation of fixed rate assets and 135 bps of revaluation of deposits, assuming a revaluation of 70% beta.

Citi notes that their published estimates include a more conservative beta of 65% with a lag, meaning it won’t be fully realized until the first quarter of 2027.

Even with this conservative approach, they see the advantage of consensus.

Citi also pointed to a $26 billion drop in deposits for the week ended Sept. 18, driven largely by a $114 billion increase in the Treasury General Account (TGA) that pushed up reserves down $143 billion.

However, deposits saw a partial offset due to the dynamics of banks abroad, as loans increased by $12 billion and loans decreased by $61 billion.

Citi remains confident in ALLY’s ability to navigate the current macroeconomic environment and capitalize on future rate cuts. As a result, they included ALLY as a top pick on their Focus List, highlighting its growth potential.