Wells Fargo upgraded Ally Financial Inc. (NYSE:ALLY) from Underweight to Equal Weight and raised its price target to $45 from $37, citing improving fundamentals in auto lending and a more balanced macro backdrop.

The analysts said while higher interest rates and elevated auto delinquencies had weighed on performance, recent revisions to earnings forecasts reflected more realistic expectations. They added that modest improvements in net charge-offs (NCOs) and net interest margin (NIM) guidance were possible in the near term.

With the Federal Reserve now considering rate cuts, Wells Fargo said Ally's risk/reward had improved. Even small reductions in rates could support margins, as auto loans are fixed-rate but funded by deposits. Management's 2025 NIM guide of 3.4%-3.5% could have upside, with every 10 basis-point increase translating to a 10% EPS lift, the firm estimated.