Ally Financial Inc. (ALLY:US), the auto lender majority-owned by U.S. taxpayers, said first-quarter profit more than tripled, aided by gains from selling assets.
Net income was $1.1 billion, compared with $310 million a year earlier, the Detroit-based company said today in a statement. The core pretax loss was $6 million, compared with core income of $111 million a year earlier. The U.S. owns 74 percent of closely held Ally, which doesn’t report earnings per share.
Chief Executive Officer Michael Carpenter is selling assets and narrowing the firm’s focus to U.S. auto lending and retail banking. His goal is to repay the $17.2 billion taxpayer bailout that gave the government a controlling stake. Carpenter may pursue an initial public offering if he can protect Ally from legal claims tied to its Residential Capital unit, which went bankrupt because of losses on subprime home loans.
Cars and light trucks sold at an average 15.2 million annualized rate in the U.S. during the first quarter, compared with 15.3 million in the fourth quarter, according to Ward’s Automotive Group data. Before then, the last time the annual pace had exceeded 15 million was the fourth quarter of 2007.
Ally completed the sale last month of contracts for the right to handle billing and collections on $115 billion in outstanding mortgages. The deals for so-called servicing rights with Ocwen Financial Corp. (OCN:US) and Quicken Loans Inc. generated about $850 million in proceeds. Another $2.6 billion came from selling most of Ally’s operations in Europe and Latin America to General Motors Co. (GM:US), the largest U.S. automaker.
Ally, formerly known as GMAC Inc., was owned by GM until 2006, when the automaker sold 51 percent to Cerberus Capital Management LP. GMAC almost collapsed under the weight of bad subprime mortgages during the financial crisis. The U.S. took its 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 IPO, which was put on hold until ResCap’s bankruptcy (ALLY:US) is closer to resolution. The 66-year-old CEO has said Ally would be willing to contribute $750 million to ResCap to insulate the parent company from legal claims.
ResCap debt holders asked U.S. Bankruptcy Judge Martin Glenn in Manhattan last month for permission to sue Ally, saying it may be responsible for $25 billion of ResCap’s debt.
Ally also has sparred with the Federal Reserve, which rejected the lender’s capital plan after finding that the firm’s planning process and capital ratios didn’t meet standards. The lender said the central bank’s analysis was “fundamentally flawed.”
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