U.S. Treasury Said to See Ally IPO Unlikely, Press for Sale

The U.S. Treasury Department, which put $17.2 billion into a bailout of Ally Financial Inc., would prefer a breakup and sale of the lender because an initial public offering may not succeed, according to people familiar with the matter.

Treasury officials are telling Ally executives, directors and financial advisers that an IPO is unlikely soon because of the company’s high cost of capital relative to other banks, the potential bankruptcy of a mortgage unit, and its recent performance in Federal Reserve stress tests, said the people, who asked not to be identified because the talks are private.