Ally Financial Posts Profit as Vehicle Sales Gain

Ally Financial Inc., the biggest U.S. auto lender, swung to a fourth-quarter profit as more consumers went shopping for cars and trucks.

Net income was $1.4 billion, compared with a loss of $206 million a year earlier, the Detroit-based company said today in a statement. Core pretax income was $19 million, rising from a $172 million loss a year earlier. The U.S. owns 74 percent of closely held Ally, which doesn’t report earnings per share. The quarter included three months in which annualized vehicle sales hovered near their best pace since 2008.

Chief Executive Officer Michael Carpenter, 65, is selling assets to repay Ally’s $17.2 billion federal rescue during the credit crisis that gave the government a controlling stake. He’s narrowing the firm’s focus to auto loans and U.S. retail banking while working to protect Ally from claims tied to its Residential Capital unit, which went bankrupt because of losses on subprime home mortgages.

“Our core auto services and direct banking platforms made substantial progress amid competitive markets,” Carpenter said in the statement.

Measured by continuing operations, Ally said income at its automotive finance unit rose to $371 million from $285 million a year earlier, aided by a 60 percent rise in lease originations. Mortgage operations showed a $100 million profit, little changed from a year earlier.

Online Banking

Ally Bank reported pre-tax income of $204 million, or $352 million excluding one-time items, compared with $448 million in the year-earlier period. Retail deposits for the online-based bank advanced 27 percent to $35 billion with customer accounts up 25 percent to 1.2 million.

For the full year, Ally said it earned $1.2 billion, compared with a $157 million loss in 2011. The core pre-tax loss in 2012 was $419 million, compared with income of $11 million a year earlier.

General Motors Co. agreed last year to purchase Ally’s international auto-finance businesses for $4.2 billion. As part of the GM deal, Ally promised not to compete for three years with the units being sold or to poach employees.

Ally, formerly known as GMAC Inc., was owned by GM until 2006, when the automaker sold 51 percent of it to Cerberus Capital Management LP. The U.S. took a controlling stake in return for a package of financial aid designed to keep credit flowing to the auto industry and preserve jobs.

Exit Strategy

Carpenter’s plan for repaying the U.S. has included an initial public offering, which was put on hold until ResCap’s status is closer to resolution. Investors have objected to some terms of ResCap’s bankruptcy that were intended to cap Ally’s liability.

The U.S. Treasury and the watchdog for its bailout program are sparring over whether the department has an adequate exit plan for the lender. The special inspector general for the Troubled Asset Relief Program said last month that “it is essential that when the government finally exits Ally that it does so forever.”

Ally’s No. 1 rank in U.S. auto lending is being challenged by Wells Fargo & Co., the fourth-largest bank by assets and already the biggest in home mortgages. Data from Experian Information Solutions Inc. show San Francisco-based Wells Fargo with 5.9 percent of the market for sales in the third quarter, compared with 5.5 percent for Ally. Measured by combined new and used sales plus leasing, Ally retained its lead in the quarter with $9.6 billion of consumer originations, according to the lender.

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