Ally Financial Swings to Profit on Gains From Mortgages
(Corrects year-earlier data and exclusions for mortgage results in the sixth paragraph.)
Ally Financial Inc. (ALLY), the auto lender that got a $17.2 billion government bailout, reported a $384 million third-quarter profit, reversing a loss from a year earlier on a gain from its mortgage operations.
Earnings compared with a loss of $898 million in the second quarter and a loss of $210 million a year earlier, the Detroit- based company said today in a statement. Profit declined in auto lending and insurance.
Chief Executive Officer Michael A. Carpenter is selling assets as he seeks to repay taxpayers for a U.S. rescue during the credit crisis, and he said today that multiple bidders have responded. Carpenter, 65, is narrowing the focus of the firm, formerly known as GMAC Inc., to auto lending and U.S. banking.
“The steps we are taking, coupled with the strength of the underlying auto finance and direct banking franchises, will support Ally’s plan to repay the remaining U.S. Treasury investment and thrive going forward,” Carpenter said in the statement.
Pretax income at the North American auto finance business fell 7.4 percent to $510 million and tumbled 70 percent to $33 million at the insurance unit, according to a presentation on the firm’s website.
Ally’s mortgage operations posted pretax income of $354 million, compared with $13 million a year earlier, according to a slide show. The results exclude the performance of Residential Capital LLC, the subprime mortgage company that filed for bankruptcy in May. ResCap raised $4.5 billion last month through auctions of a servicing and origination business, and a loan portfolio.
Profit at the mortgage unit was driven in part by hedging activities tied to mortgage servicing, the firm said. Ally said last month it may sell this business, which involves billing, collections and managing foreclosures.
Carpenter agreed to sell a Canadian unit to Royal Bank of Canada last month in a cash deal providing $4.1 billion in proceeds to Ally. The firm also agreed to sell its Mexican insurance business to Ace Ltd. (ACE) for $865 million. Ally expects to “identify plans” this month for other international operations, including auto finance businesses in Europe and Latin America, according to the statement.
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