Ally Reports Profit as Auto, Mortgage Units Pick Up
Ally Financial Inc., the auto and home lender majority-owned by U.S. taxpayers, reported a fourth straight quarterly profit as the mortgage unit became profitable and car and truck financing gained.
Fourth-quarter earnings were $79 million, compared with a loss of $4.95 billion in the same period a year earlier, Detroit-based Ally said today in a statement. The company is 73.8 percent owned by the U.S. government and doesn’t have publicly traded shares. Annual profit was $1.1 billion versus a $10.3 billion loss in 2009, reported Bloomberg.
Chief Executive Officer Michael Carpenter is preparing the company for an initial public offering that may take place this year. Last week, Ally interviewed investment banks to manage the IPO while the U.S. Treasury Department named Perella Weinberg Partners LP to assist with the disposal of its stake.
Ally reduced risk in its mortgage business, which “significantly strengthened the company and will enable repayment of the U.S. Treasury’s investment over time,” Carpenter, 63, said in the statement.
Net income from continuing operations in North American auto finance increased to $589 million before income tax expenses in the fourth quarter from $343 million in the year- earlier period, the company said.
IPO Implications
“These results are very important for their IPO,” Mirko Mikelic, a senior money manager who helps oversee $13 billion of fixed-income assets at Fifth Third Asset Management in Grand Rapids, Michigan, said before the announcement. “It obviously helps with the pricing, and if they continue to post good results there will be strong demand.”
Carpenter said he could not comment on Ally’s initial public offering on a conference call with investors.
The mortgage business posted a $172 million pretax profit from continuing operations, compared with a loss of $180 million in the last three months of 2009.
“The mortgage area was the wild card, and that looks like where the improvements were,” Mikelic said after the results were released.
Ally said today it hasn’t found “any evidence of inappropriate foreclosures in its review process,” amid concern some lenders have taken improper shortcuts to speed the process of taking homes.
25,000 Mortgages
Of the 25,000 “potentially affected” affidavits identified at the end of the third quarter, all but 2,548 have been remediated or re-executed, the company said.
Ally completed mortgage repurchase reserve settlements with seven counterparties, including a $462 million settlement to resolve claims by Fannie Mae on $292 billion in home loans in December.
The remaining reserves are “primarily” for potential non- government sponsored entities’ claims and related to monoline insurers, the company said. The “vast majority” of monoline claims have been reviewed and considered ineligible for repurchase, Ally said.
The U.S. stake was increased at the end of December when the government converted $5.5 billion of preferred shares into common shares. The conversion increased the book value of Ally’s common stock to about $13.8 billion, a Treasury official said at the time.
Ally, once owned by General Motors Co., averted bankruptcy with the help of three rounds of government aid totaling $17.2 billion. The company is the primary lender to GM and Chrysler Group LLC dealers.
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