Ally Financial Inc. (ALLY:US), 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, compared with a loss of $172 million 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.
General Motors Co. (GM:US) 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.
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 (ALLY:US) that were intended to cap Ally’s liability.
Ally’s No. 1 rank in U.S. auto lending is being challenged by Wells Fargo & Co. (WFC:US), 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 the third quarter, compared with 5.5 percent for Ally.
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