Ally Financial Reports Preliminary Second Quarter 2012 Financial Results

   Ally Financial Reports Preliminary Second Quarter 2012 Financial Results

PR Newswire

NEW YORK, Aug. 1, 2012

NEW YORK, Aug. 1, 2012 /PRNewswire/ --

  oStrong performance in auto finance and direct banking franchises drives
    core pre-tax income of $533 million, excluding ResCap-related items
  oSecond quarter 2012 net loss of $898 million and core pre-tax loss of $753
    million, including impact of previously announced ResCap-related items
  oResCap bankruptcy case continues to move forward
  oExploring strategic alternatives for all international businesses

Ally Financial Inc. (Ally) today reported a net loss of $898 million for the
second quarter of 2012, compared to net income of $310 million in the prior
quarter and net income of $113 million for the second quarter of 2011. The
company reported a core pre-tax loss of $753 million for the second quarter of
2012, compared to core pre-tax income of $474 million in the prior quarter and
$465 million in the comparable prior year period. Core pre-tax income/loss
reflects income from continuing operations before taxes and original issue
discount (OID) amortization expense primarily from bond exchanges.

Results for the quarter were adversely affected by a $1.2 billion charge
resulting from Residential Capital, LLC, and certain of its subsidiaries
(ResCap) filing for Chapter 11 bankruptcy protection on May 14 and a proposed
settlement between ResCap and Ally, as previously announced. Also, as a result
of the bankruptcy, ResCap was deconsolidated from Ally's financial statements.

Excluding the ResCap-related charge and a ResCap pre-tax loss for the partial
quarter prior to May 14, Ally earned $533 million of core pre-tax income for
the quarter, driven by growth in the company's core automotive services and
U.S. direct banking platforms.

"The second quarter of 2012 marked a seminal moment for Ally. Strategic
actions were announced in May that aim to permanently address the legacy
mortgage risks and put Ally on an accelerated path to repay the remaining U.S.
Treasury investment," said Ally Chief Executive Officer Michael A. Carpenter.
"The ResCap Chapter 11 case continues to move forward, and plans to pursue
alternatives for Ally's international operations are underway. Successful
completion of these activities will enhance Ally's capital position and
further clarify our mission to be the leading value-added auto finance
provider to U.S. dealers, supported by a growing direct bank with a
distinctive, customer-friendly approach."

Carpenter continued, "The core business fundamentals remained strong during
the quarter. Ally's auto finance franchise continued to lead the industry,
despite intense competition, and posted the second highest quarter of consumer
originations since 2007. We continue to broaden and diversify this franchise,
which is centered on powering thousands of dealers across the country as the
top auto finance provider.

"The second quarter also marked the third anniversary of the Ally Bank brand,
and this unique franchise exceeded $30 billion of retail deposits. Ally Bank
continues to be a key part of our operations with about 60 percent of U.S.
assets now being funded at the bank."

Income/(Loss) from Continuing Operations by Segment
($ millions)

                                                          Increase/(Decrease)

                                                          vs.
                                    2Q 12   1Q 12  2Q 11  1Q 12      2Q 11
 North American Automotive Finance $631    $442   $559   $189       $72
 International Automotive Finance  72      45     69     27         3
 Insurance                         43      124    72     (81)       (29)
Global Automotive Services          $746    $611   $700   $135       $46
Mortgage Operations (ex. ResCap)^1  $110    $55    $(25)  $55        $135
Corporate and Other (ex. OID)^1,2   $(323)  $(307) $(99)  $(16)      $(224)
Core pre-tax income, excluding      $533    $359   $576   $174       $(43)
ResCap-related items^3
ResCap-related items                (1,285) 115    (111)  (1,400)    (1,174)
Core pre-tax(loss) income ^4        $(753)  $474   $465   $(1,226)   $(1,217)
OID amortization expense^5          96      108    274    (11)       (177)
Income tax expense                  15      64     83     (49)       (68)
(Loss) income from discontinued     (34)    8      5      (42)       (39)
operations^6
Net income (loss)                   $(898)  $310   $113   $(1,208)   $(1,011)

1. Mortgage Operations and Corporate and Other are presented excluding
ResCap-related items. These items are non-GAAP financial measures. For
reconciliations, refer to slide 23 in the Ally Financial Inc. 2Q Earnings
Review presentation, which is available at
www.ally.com/about/investor/events-presentations/. This presentation will also
be filed on a Form 8-K with the U.S. Securities and Exchange Commission.
2. Corporate and Other primarily consists of Ally's centralized treasury and
deposit gathering activities and the residual impacts of the company's
corporate funds transfer pricing and Treasury asset liability management
activities. Corporate and Other also includes the Commercial Finance Group,
certain equity investments and reclassifications, and eliminations between the
reportable operating segments.
3. Core pre-tax income is a non-GAAP financial measure and is defined as
income from continuing operations before taxes, OID amortization expense
primarily from bond exchanges. The ResCap-related items of $1.3 billion
include a pretax loss from ResCap and the charge resulting from ResCap filing
for Chapter 11 bankruptcy protection on May 14.
4. Core pre-tax income, a non-GAAP financial measure, is defined as income
from continuing operations before taxes and OID amortization expense primarily
from bond exchanges.
5. OID amortization expense includes accelerated OID amortization of $20
million in the second quarter of 2011 from the extinguishment of debt.
6. The following businesses are classified as discontinued operations: the
U.K. consumer property and casualty insurance business (sale completed 2Q11);
retail automotive finance operations in Ecuador (sale completed 1Q11);
automotive finance operations in Russia and Venezuela (sale completed 1Q12);
the full-service leasing businesses in Austria, Germany, Greece, Portugal and
Spain (sale announced 4Q11); ResMor Trust mortgage operations (Canada) (sale
completed 2Q12); and U.K.-based operations that provide vehicle service
contracts and insurance products in Europe and Latin America (sale announced
4Q11).

Highlights

  oAlly strengthened its position as an industry-leading auto finance
    franchise, despite substantially increased competition.

       oNorth American Auto Finance posted $631 million pre-tax income, up 13
         percent year-over-year.
       oGrew U.S. consumer financing originations to $10.5 billion for the
         quarter – the second highest quarter in five years.
       oContinued progress in diversification efforts have reduced reliance
         on subvented business; franchise is well-positioned with a
         dealer-centered model.
       oContinued strong growth in U.S. diversified and used originations, up
         64 percent and 20 percent year-over-year respectively.
       oExpanded number of diversified U.S. dealer relationships 24 percent
         year-over-year.
       oSelected as a preferred consumer financing provider for Mitsubishi
         Motors North America and an additional wholesale financing provider
         for Forest River, a leading RV manufacturer.
       oAlly's online used vehicle auction unit, SmartAuction, is expected to
         sell its 4 millionth vehicle this month.

  oAlly Bank continued to build its deposit base and maintained strong
    customer loyalty with a unique consumer value proposition.

       oGrew retail deposits to $30.4 billion, up 24 percent from the second
         quarter of 2011.
       oGrew to nearly 1.1 million customer accounts – up 27 percent
         year-over-year.
       oLaunched mobile banking application in response to customer trends,
         immediately earning accolades and strong user satisfaction ratings.
       oRecognized as a banking industry leader in reputation and
         trustworthiness by consumers and third-party researchers (Sources:
         American Banker/Reputation Institute; and Ponemon Institute).
       oMaintained strong CD balance retention rates of 90 percent during the
         second quarter.

  oAlly maintained a strong capital and liquidity profile, and interest from
    lenders and investors demonstrated continued market confidence.

       oCompleted new global secured and unsecured funding transactions
         totaling nearly $10 billion during the quarter, including $1.5
         billion of new unsecured debt in June.
       oImproved cost of funds approximately 40 basis points
         quarter-over-quarter.
       oMaintained robust capital ratios with preliminary Tier 1 capital
         ratio at 13.7 percent.
       oTime to Required Funding remains strong at more than two years.

  oIncluding dividends and interest, Ally will have paid approximately $5.7
    billion to the U.S. Treasury as of Aug. 15, 2012, reflecting approximately
    one-third of the investment made in the company.

  o$7.4 billion of TLGP debt matures in the second half of 2012 and will
    normalize liquidity levels.

Liquidity and Capital
Ally grew its consolidated cash and cash equivalents to $16.1 billion as of
June 30, 2012, compared to $13.1 billion at March 31, 2012. Included in the
June 30 balance are: $3.4 billion at Ally Bank and $1.3 billion at the
insurance business.

Ally's total equity was $18.4 billion at June 30, 2012, compared to $19.7
billion at the prior quarter's end. The decrease in total equity was primarily
due to the $1.2 billion charge resulting from ResCap's Chapter 11 bankruptcy
filing, which consisted primarily of the company's total impairment of its
$442 million equity interest in ResCap and a proposal to contribute $750
million in cash to the ResCap bankruptcy estate in conjunction with a ResCap
plan of reorganization that would include a global settlement of all claims
against Ally entities related to ResCap. The company's preliminary second
quarter 2012 Tier 1 capital ratio was 13.7 percent, compared to 13.5 percent
in the prior quarter. The increase was primarily due to a decrease in
risk-weighted assets related to the deconsolidation of ResCap, which was
partially offset by the ResCap-related charge.

In June, Ally resubmitted the Comprehensive Capital Analysis and Review plan
to the Federal Reserve. Ally has among the highest Tier 1 capital ratio in
the industry and recently announced actions with respect to ResCap and the
international operations that are designed to further strengthen the company's
capital and liquidity positions and risk profile going forward.

Funding
Ally completed new funding transactions globally totaling nearly $10 billion
during the second quarter of 2012, which included $8.4 billion of new secured
funding transactions and $1.5 billion of new unsecured debt.

The company's Time to Required Funding remains strong at more than two years
as of June 30. This is a liquidity measure expressed as the number of months
that the company expects to be able to meet its ongoing liquidity needs as
they arise without issuing unsecured debt. It assumes no changes in North
American asset growth projections and that the auto asset-backed securities
market remains open. Moreover, proactive liquidity management continues to
effectively pre-fund more than two years of unsecured debt maturities.

Deposits
The company remains focused on growing deposits through its direct banking
subsidiary Ally Bank.Total deposits increased in the second quarter to $48.0
billion, from $47.2 billion at March 31, 2012. Retail deposits at Ally Bank
were $30.4 billion at June 30, 2012, compared to $29.3 billion at the end of
the prior quarter. Brokered deposits at Ally Bank totaled approximately $9.9
billion at June 30, 2012, unchanged from the prior quarter's end. Ally Bank's
deposit growth was supported by strong CD balance retention rates of 90
percent and a stable savings portfolio with low runoff. In addition, the IRA
CD and IRA savings products introduced last summer have contributed to growth,
with more than 22,000 new accounts opened since launch and an increase of 77
percent in balances in the first half of the year, totaling $703 million as of
June 30, 2012. At the end of the quarter, Ally Bank had nearly 1.1 million
customer accounts, growing 27 percent since last year, as Ally Bank's
consumer-centric value proposition continues to attract customers.

Ally Bank
For purposes of quarterly financial reporting, Ally Bank's operating results
are included within North American Automotive Finance, Mortgage Operations and
Corporate and Other, based on its underlying business activities. During the
second quarter of 2012, Ally Bank reported pre-tax income of $420 million,
compared to $259 million in the corresponding prior year period. Performance
in the quarter was largely driven by continued growth in automotive assets,
particularly leases. Also contributing to results was an increase in mortgage
production volume from government-sponsored refinancing programs. Total assets
at Ally Bank were $87.3 billion at June 30, 2012, compared to $88.6 billion at
March 31, 2012. The decrease in assets was due in part to lower mortgage loans
held-for-sale resulting from the decision in the fourth quarter of last year
to reduce the correspondent mortgage business, and a $2 billion sale of retail
auto receivables that occurred in June. The decrease was partially offset by
strong retail automotive finance and lease originations. Approximately sixty
percent of the company's U.S. assets were funded at Ally Bank as of June 30,
2012.

Global Automotive Services
Global Automotive Services is comprised of Ally's auto-centric businesses:
North American Automotive Finance, International Automotive Finance and
Insurance. The group reported second quarter 2012 pre-tax income from
continuing operations of $746 million, compared to $700 million in the
comparable prior year period.

North American Automotive Finance
North American Automotive Finance, which includes results for the U.S. and
Canada, reported pre-tax income of $631 million for the second quarter of
2012, compared to $559 million in the corresponding prior year period. This
increase was primarily driven by strong financing revenue due to solid retail
asset growth and a lower loan loss provision largely resulting from improved
credit performance. Pre-tax income also benefitted from lower noninterest
expense.

North American consumer financing originations in the second quarter of 2012
were $11.7 billion, compared to $10.3 billion in the corresponding prior year
period. Consumer financing origination levels in the second quarter of 2012
were driven primarily by higher industry sales and growth in the used and
diversified channels. In the U.S., second quarter 2012 consumer financing
originations were $10.5 billion, compared to $9.5 billion in the second
quarter of 2011, and were comprised of $5.9 billion of new retail, $2.6
billion of used and $2.1 billion of leases. U.S. used volume grew 20 percent
compared to the corresponding prior year period, and U.S. diversified new
originations increased 64 percent year-over-year. Combined, used and
diversified new originations now account for 30 percent of total U.S consumer
originations.

Earning assets for North American Automotive Finance, whichare on-balance
sheet assets comprised primarily of consumer receivables, the consumer
held-for-sale portfolio, leases and commercial receivables, totaled $104.1
billion, up 15 percent compared to the end of the second quarter of 2011.
Consumer earning assets totaled $70.0 billion, up 21 percent year-over-year,
as strong originations continued to outpace asset run-off. Commercial earning
assets grew to $34.1 billion at June 30, 2012, compared to $33.0 billion at
the end of the comparable prior year period. The year-over-year increase was
largely driven by higher dealer inventories to support growing auto industry
sales.

International Automotive Finance
International Automotive Finance reported pre-tax income from continuing
operations of $72 million in the second quarter of 2012, compared to $69
million in the same period last year. Growth in the business driven by
increased asset levels was masked by the negative impact of declining foreign
exchange rates. International consumer originations from continuing operations
were $2.3 billion during the second quarter of 2012, essentially flat
year-over-year. Stronger originations in Latin America and Europe were largely
offset by declining foreign exchange rates, while originations in China
declined due to a softening economy.

Insurance
Insurance, which focuses on dealer-centric products such as extended service
contracts and dealer inventory insurance, reported pre-tax income from
continuing operations of $43 million in the second quarter of 2012, compared
to $72 million in the corresponding prior year period. Underwriting income
declined due to higher U.S. weather-related losses. Investment gains were $30
million in the second quarter of 2012, compared to $52 million in the
comparable prior year period as investment income moderated. The Dealer
Products and Services group continued to see improvement in penetration with
written premiums at $283 million for the second quarter of 2012, the highest
level since 2008. Additionally, the group increased the number of dealers
committed to its full suite of training, technology, support and consultative
services.

Mortgage Operations
On May 14, as a result of ResCap's Chapter 11 bankruptcy filing, the entity
was deconsolidated from Ally's financial statements and Ally's equity interest
in ResCap was written-down to zero. Consequently, Ally's remaining Mortgage
Operations have been combined into one reporting segment and do not include
ResCap.

During the second quarter 2012, Mortgage Operations, excluding ResCap,
reported pre-tax income of $110 million, compared to a pre-tax loss of $25
million during the second quarter of 2011.[1] Performance in the quarter was
driven by an increase in production volume from government sponsored
refinancing programs and the related gain on sale.

Total mortgage loan production, excluding ResCap, in the second quarter of
2012 was $5.9 billion, consisting primarily of prime conforming loans,
compared to $8.5 billion in the first quarter of 2012 and $12.3 billion in the
second quarter of 2011. The decline in loan production was largely driven by
the company's reduced presence in the correspondent lending channel.
Refinancing activity accounted for 82 percent of overall loan production
during the quarter.

Ally Bank announced in July that it would exit the warehouse lending business
over the coming months as it has become a less strategic part of the business.
The wind-down is expected to be completed by year end.

During the quarter, ResMor, Ally's Canada-based trust company, also completed
the sale of its residential mortgage operations and certain related assets to
MCAP, one of Canada's leading mortgage finance companies. The agreement closed
on June 1, 2012, following regulatory approval.

Corporate and Other
Corporate and Other primarily consists of Ally's centralized treasury and
deposit gathering activities, the residual impacts of the company's corporate
funds transfer pricing and asset liability management activities, and the
amortization of the discount associated with new debt issuances and bond
exchanges. Corporate and Other also includes the Commercial Finance business,
certain equity investments and reclassifications, and eliminations between the
reportable operating segments.

Corporate and Other reported a core pre-tax loss (excluding OID amortization
expense and the ResCap-related items) of $323 million, compared to a core
pre-tax loss of $99 million in the comparable prior year period.[2] The
results were primarily affected by two non-recurring items in the second
quarter of 2011: an early settlement in 2011 of a loss holdback provision
under certain historical auto whole-loan forward flow agreements, and the
release of credit reserves related to certain customer accounts and other
favorable non-recurring items within the Commercial Finance business.

OID amortization expense (including accelerated amounts) totaled $96 million
in the second quarter of 2012, compared to $274 million reported in the
corresponding prior year period.

Strategic Actions
On May 14, Ally announced key strategic actions aimed at strengthening the
company's longer term financial profile and accelerating repayment of the U.S.
Treasury's investment. Ally made the decision to no longer financially
support ResCap, and ResCap made the decision to file for Chapter 11.
Additionally, Ally decided to launch a process to explore strategic
alternatives for its international businesses, which includes auto finance,
insurance, and banking and deposit operations outside of the U.S.

ResCap Chapter 11 Filing
The ResCap bankruptcy process continues to move forward. ResCap has been
successful in obtaining approval by the bankruptcy court for its key initial
requests. Important developments that have occurred in ResCap's bankruptcy
case that impact Ally thus far include:

  oResCap sought, and the bankruptcy court approved, the replacement of Ally
    with Berkshire Hathaway as the stalking horse bidder for ResCap's legacy
    loan portfolio. Ally agreed to serve as the proposed stalking horse
    bidder under the Ally/ResCap Chapter 11 Plan Sponsor and Settlement
    Agreement, and ResCap has stated that Ally fulfilled its obligations under
    this agreement regardless of Berkshire's subsequent higher offer;
  oThe court's approval, on a final basis, of the shared services agreement
    between Ally and ResCap, allowing operations to continue in the normal
    course and in an orderly fashion;
  oThe court's approval, on a final basis, of ResCap's proposed debtor in
    possession financing facility provided by Ally; and
  oThe court entered an order providing for a temporary injunction of 24
    lawsuits pending against Ally and its affiliates, which are related to
    ResCap, until Oct. 31, 2012.

International Businesses
Ally continues to pursue strategic alternatives for all of its international
businesses, which represent $31 billion in total assets and a legal entity
book value of $7.6 billion. These businesses represent strong franchises in
each of the respective countries, and Ally's mission in exploring alternatives
for these businesses is to maximize shareholder value in a timely manner,
while also protecting the interests of the dealers and automakers that the
company serves.

Additional Financial Information
For additional financial information, the second quarter 2012 earnings
presentation and financial supplement are available in the Events &
Presentations section of Ally's Investor Relations Website at
http://www.ally.com/about/investor/events-presentations/index.html.

About Ally Financial Inc.
Ally Financial Inc. is a leading automotive financial services company powered
by a top direct banking franchise. Ally's automotive services business offers
a full suite of financing products and services, including new and used
vehicle inventory and consumer financing, leasing, inventory insurance,
commercial loans and vehicle remarketing services. Ally Bank, the company's
direct banking subsidiary, offers an array of deposit products, including
certificates of deposit, savings accounts, money market accounts, IRA deposit
products and online checking. Ally's Commercial Finance unit provides
financing to middle-market companies across a broad range of industries.

With approximately $179 billion in assets as of June 30, 2012, Ally operates
as a bank holding company. For more information, visit the Ally media site at
http://media.ally.com or follow Ally on Twitter: @ally.

Forward-Looking Statements
In this earnings release and in comments by Ally Financial Inc. ("Ally")
management, the use of the words "expect," "anticipate," "estimate,"
"forecast," "initiative," "objective," "plan," "goal," "project," "outlook,"
"priorities," "target," "explore," "positions," "intend," "evaluate,"
"pursue," "seek," "may," "would," "could," "should," "believe," "potential,"
"continue," or the negative of any of those words or similar expressions is
intended to identify forward-looking statements. All statements herein and in
related charts and management comments, other than statements of historical
fact, including without limitation, statements about future events and
financial performance, are forward-looking statements that involve certain
risks and uncertainties.

While these statements represent our current judgment on what the future may
hold, and we believe these judgments are reasonable, these statements are not
guarantees of any events or financial results, and Ally's actual results may
differ materially due to numerous important factors that are described in the
most recent reports on SEC Forms 10-K and 10-Q for Ally, each of which may be
revised or supplemented in subsequent reports filed with the SEC. Such factors
include, among others, the following: maintaining the mutually beneficial
relationship between Ally and General Motors ("GM"), and Ally and Chrysler
Group LLC ("Chrysler"); the profitability and financial condition of GM and
Chrysler; bankruptcy court approval of the plan and settlement related to the
bankruptcy filings by Residential Capital, LLC and certain of its
subsidiaries; our ability to realize the anticipated benefits associated with
being a bank holding company, and the increased regulation and restrictions
that we are now subject to; the potential for deterioration in the residual
value of off-lease vehicles; disruptions in the market in which we fund our
operations, with resulting negative impact on our liquidity; changes in our
accounting assumptions that may require or that result from changes in the
accounting rules or their application, which could result in an impact on
earnings; changes in the credit ratings of Ally, Chrysler, or GM; changes in
economic conditions, currency exchange rates or political stability in the
markets in which we operate; and changes in the existing or the adoption of
new laws, regulations, policies or other activities of governments, agencies
and similar organizations (including as a result of the Dodd-Frank Act and
Basel III).

Investors are cautioned not to place undue reliance on forward-looking
statements. Ally undertakes no obligation to update publicly or otherwise
revise any forward-looking statements, whether as a result of new information,
future events or other such factors that affect the subject of these
statements, except where expressly required by law.

[1] For details with respect to how ResCap impacted Mortgage Operations for
the periods shown, refer to slide 23 in the Ally Financial Inc. 2Q Earnings
Review presentation, which is available at
www.ally.com/about/investor/events-presentations/. This presentation will also
be filed on a Form 8-K with the U.S. Securities and Exchange Commission.

[2] Core pre-tax loss is a non-GAAP financial measure. Refer to slides 21 and
23 in the Ally Financial Inc. 2Q Earnings Review presentation for
reconciliation to GAAP amounts. This is available at
www.ally.com/about/investor/events-presentations/. This presentation will also
be filed on a Form 8-K with the U.S. Securities and Exchange Commission.

Contacts:
Gina Proia
646-781-2692
gina.proia@ally.com

Sarah Comstock
313-656-6954
sarah.n.comstock@ally.com

SOURCE Ally Financial

Website: http://www.ally.com
 
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