Ally Financial (ALLY 0.41%) stock gained 43% in 2023, according to data provided by S&P Global Market Intelligence. Despite feeling pressure from the banking turmoil last March, the bank finished the year strong as the Federal Reserve signaled a potential pivot in its interest-rate policy.

Ally Financial proved resilient amid March's banking turmoil

About one year ago, bank stocks faced a significant test. Higher interest rates and deposit outflows put regional banks on the defensive.

Ultimately, SVB Financial's Silicon Valley Bank, Signature Bank, and First Republic Bank all went under in some of the most significant bank failures since 2008. Concern spread across the banking sector as investors weighed whether others could face a similar fate.

Ally Financial rode out these challenges well because of its solid balance sheet and the stability of its deposits. One leading cause of Silicon Valley Bank's collapse was that a significant portion of its deposits were over the FDIC's insured deposit limit of $250,000.

At Ally Financial, 92% of its deposits are FDIC insured. Not only that, but the bank's $153 billion deposit base has increased by $11 billion since the Federal Reserve began raising interest rates in March 2022.

Ally also stands to benefit from the Federal Reserve's pivot on interest-rate hikes. From March 2022 through July 2023, the Federal Reserve raised its benchmark rate 11 times, from near zero to 5.5%. Since its July meeting, the Fed has held its benchmark rate steady, potentially signaling that the central bank is done raising interest rates this cycle.

The pivot by the Federal Reserve is a positive sign for bank stocks that have felt pressure from rising deposit costs, which have weighed on their net interest margins. Higher rates have also led to a slowdown in lending activity.

According to CME Group's FedWatch Tool, market participants project the federal funds rate could come down to around 4% by the end of the year. Lower interest rates could spur more demand for loans as borrowing costs come down and provide relief to consumers who have struggled with growing debt burdens along with higher interest rates.

Is Ally Financial a buy?

Much of Ally Financial's gains from last year came in the past few months, with the stock up 52% from its October low. The bank stock went from trading at a 20% discount to tangible book value to a 9% premium to book value in that time, so it's not quite the bargain it was a few months ago.

One thing Ally investors want to keep an eye on is the bank's loan portfolio. In recent quarters, the bank has seen delinquencies and charge-offs tick higher. However, with plenty of reserves to account for losses and the Fed projected to cut rates this year, a sell-off could be an excellent opportunity for long-term investors to scoop up shares of this solid bank stock.